Corabiualiows 
KouopoUes 


q^^wnfd;  l-,M'Ja  m 


LIBRARY 

OF    THE 

UNIVERSITY  OF  CALIFORNIA. 
Class 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/combinationstrusOOnolarich 


UNIVcKSITY 

or 


Ol0mbtnatt0n0 
oFruBta 

lA  Discussion  of  the  Origin,  Development,  and 
Treatment  of  the  Modern  Indus- 
trial Combination. 


Sr^aluuag  PubliatFtns  CInmitmtg 

835   Broadway,   New    York 


Copyrighted,     1904, 

BY 

EDWARD   J.    NOLAN,    LL.B* 


AU    Rights    Restrvtd, 


CONTENTS. 


CHAPTER  I. 
Preliminary  Observations. 

r^  PAGE 

The    present    situation 1 

The  Elkin's  amendment  to  the  interstate  commerce 

act     2 

The  Bureau  of  Corporations 2 

Analysis    required    4 

Eemedies  must  come  from  the  people 6 

CHAPTER  II. 

The  Competitive  System. 


Its  origin  and  development 8 

In    the    commercial    world 9 

The   introduction   of   partnerships 12 

The  creation  of   corporations 12 

The  evolution  of  competition  in  the  productive  in- 
dustries       13 

Deceits  in  trade  and  adulteration  of  products 15 

The  beginning  of  combination 15 


iv  Contents. 

PAGE 

Competition  defined   16 

Beneficial   effects  of   competition 16 

Equality  of  opportunity  required 17 

Individuality  is  the  life  of  competition 18 

Competition  has  long  been  favored  by  the  law....  19 

It  has  been  supported  by  statutes,  etc 19 

Summary    20 


CHAPTER   III. 
Objects  of  Combination. 


Causes  which  led  to  the  formation  of  combinations.  22 

Extreme  sharpness  of  competition 22 

Exhaustion  of  speculative  fields  of  investment....  22 

The  lowering  of  the  rates  of  interest 23 

The   panic   of    1893 23 

Advantages   of   combination   enumerated 23 

Salaries  paid  to  officials,  etc 25 

Dispensing  with  the  services  of  traveling  salesmen.  26 

;     Reduction  of  rent  charges 27 

/     Decrease  in  the  cost  of  light,  heat,  and  ventilation.  28 

S    Employment  of  plants  to  their  full  capacity 29 

S    Saving  in  freight  charges 29 

/  ■*  Economy  in  the  purchase  of  raw  materials 29 

I    Improved  facilities  for  advertising 31 

I     Development  of  foreign  markets 31 

>     Table  of  exports  of  manufactures 32 


CHAPTER  IV. 
FoBMs  OF  Obganizatiott. 


The  working  agreement 35 

Agreement  for  the  division  of  territory 37 

Pools    38 


Contents.  y. 

Trusts    39 

The    great    corporation 42 

Securities   holding   corporations 44 


CHAPTER  V. 
PowEBS  AND  Effects  of  Monopolies. 


Monopoly  defined   46 

History  of  monopoly 46 

Control  of  quantity  of  production 48 

Quality    of    production 49 

Regulation  of  price 61 

Monopoly  price 54 

Purpose  of  industrial  combinations 

Table  of   prices   of   leading  articles 61 — 82 

Effect  of  combination  upon  prices   84  ■ 

Influence  upon  wages 84-' 

The  introduction  of  new  industries 87 

The  displacement  of  labor 89 

Selfishness    of    combinations 9C 

Permanency  of  the  industrial  combinations 96 

Change  in  ownership  of  combinations 97 

Effects  of  combinations  upon  employers 98 

Displacement   of   employers 99 

Political  influence  of  combinations 104 


CHAPTER   VI. 
Growth  of  Combinations. 


The  introduction  of  the  factory  system 108 

Tendency  towards  concentration 108 

Rate  of  increase  in  the  number  of  combinations 114 

List  of  recently  organized  combinations 116 

Percentage  of  products  controlled  by  combinations. .  119 


^ 


vi  Contents. 

PAGE 

Maximum  efficiency 121 

Mass  of  capital 124 

Disposition  of  large  concerns  to  combine 120 

Evils  recognized  by  the  people 127 


CHAPTER  VII. 
Legislation  and  Judicial  Construction. 

Old  English  law  and  decisions 130 

Contracts  in  restraint  of  trade 132 

Anti-trust  statutes 134 

Extracts  from  the  decisions  of  the  Supreme  Court  of 

Illinois     134 

Ohio    135 

Pennsylvania    136 

Severity  of  corporation  laws 139 

Liberality  of  certain  states  towards  corporations...  143 

New  Jersey  the  home  of  foreign  corporations....  144 

The  filing  of  certificates  by  foreign  corporations..  148 

Need  of  revision  of  corporation  laws 151 

The  Sherman  Anti-Trust  Act 152 

Interstate  commerce  defined 155 

Jurisdiction  of   the   state  and   federal  government 

defined    155 

The  act  for  the  suppression  of  lotteries 15^ 

Constitutionality   of   the   act   considered 160 

Power  of  Congress  to  regulate  interstate  commerce.  168 


CHAPTER  VIII. 

Quasi-Public  Monopolies. 

Classification  of  monoplies    177 

Quasi-Public   Monopoly   defined    180 

Development  of  the  rights  of  the  public ISO 


Contents.  vii 

PAQE 

Kights  of  the  individual Ig5 

Perpetual    franchises 194 

Control  of  public  services  by  private  corporations.  199 

Private  interest  the  source  of  evil 209 

Municipal  control  demanded 210 

Lack  of  faith  in  the  people 213 

Control   of   a    service   distinguished   from   that  of 

property    217 

The  case  of  Munn  versus  Illinois  discussed 218 

The  true  doctrine  as  announced  by  Lord  Ellenbor- 

ough    223 


CHAPTER  IX. 
Monopolies  and  the  Tariff. 


Monopoly  depends  upon  its  ability  to  control  the 

product 228 

Control  of  the  production  of  the  raw  materials. . .   228 

Tariff  duties  serve  to  limit  the  supply 229 

Difficulties  of  controlling  the  world's  production . .   230 

Average  duty  paid  upon  imports 234 

Table   of   industrial   combinations 236 

Protection  afforded  to  combinations 248 

The  purpose  of  protection 249 

Ability  to  compete  with  foreign  producers 250 

Exports  of  American  manufactures 251 

Table  of  exports  of  manufactured  articles 252 

Combinations    as    exporters 255 

Lower  prices  to  foreign  markets 25d 

Protection  no  longer  required  by  combinations 260- 

Manufacture     of     surplus     products     for     foreign 

markets   260 

Profits  on  foreign  sales 264 

Combinations  unwilling  to  surrender  protection...   268 

Independent    producers    not    protected 269 

Combinations  not  dependent  upon  tariff  protection.  271 


viii  Contents. 

PAOC 

CHAPTER  X. 
Kesiedies. 


Duty  of  government  to  protect  the  rights  of  its 

citizens    273 

Power  to  remedy  every  evil  always  resides  in  the 

people 274 

Crood  faith   and  fair  dealing  desired *.   280 

-Public  supervision  of  corporations    281 

Powers  of  Congress  discussed 282 

^  Proposed  amendments  to  the  Constitution 283 

Difficulties  of  providing  for  federal  supervision 286 

State  supervision  necessary 289 

Objections  to  state  supervision  considered 293 

The    public    invited    to    investigate    corporate    se- 
curities    295 

Trade    secrets    297 

Publicity  necessary  for  proper  enforcement  of  laws.  300 

aight  of  the  state  t«  inspect  corporate  affairs ....  301 
i^atering  of  stocks  .\ 305 
ower  to  raise  prices  7« 311 

Limitation  of  profits 313 

Foreign  corporations    334 

Taxation  of  capital   stock 335 

Control  of  local  branches  of  foreign  corporations.. .  338 
Hemove  tariff  from  articles  produced  by  combina- 
tions   330 

Taxation   341 

Education    343 

Competition  promoted  by  reinvestment  of  profits..   345 

Advantages  of  small  competitors  discredited 346 

No  hope  of  natural  dissolution  of  corporations ....   347 

Competition   should  be  fostered 350 

Monopoly  of  the  sources  of  production  restricted . .  351 

Paternalism    352 

Conclusion    353 


(, 


Combinations,  Trusts  &  Monopolies 


CHAPTER  I. 

PEELIMINARY   OBSERVATION'S. 

"An"  indefinable  something  is  to  be  done  in  a  way 
nobody  knows  now  and  at  a  time  nobody  knows 
when.  That,  as  I  understand,  is  the  programme 
against  the  trusts."  The  foregoing  summary  of 
the  attitude  of  the  people  toward  the  trusts  is  said 
to  have  been  made  by  the  late  ex-Speaker  Thomas 
B.  Keed  while  in  conversation  with  a  leading  mem- 
ber of  the  House  on  the  opening  day  of  the  sec- 
ond session  of  the  Fifty-seventh  Congress,  in  De- 
cember, 1902.  It  fairly  expressed  the  feelings  of 
unrest  and  dissatisfaction  and  the  spirit  of  de- 
termined but  unguided  and  almost  hopeless  resist- 
ance to  the  overwhelming  oppressions  of  the  trusts 
which  pervaded  the  rank  and  file  of  the  people  of 
every  political  party  at  that  time.  Nothing  has 
since  been  done  to  relieve  the  situation,  and  con- 
ditions are  daily  becoming  more  intensified  and 
unbearable,  and  we  have  every  reason  to  believe 
that  the  same  statement  might  be  repeated  with 


2  Combinations, 

equal  truth  and  fairness  at  the  opening  of  the 
Fifty-eighth  Congress. 

The  Statute  enacted  by  the  Fifty-seventh  Con- 
gress, commonly  known  as  the  Elkins  Law,  is 
merely  an  amendment  to  the  Interstate  Commerce 
Act,  and  is  designed  to  afford  a  more  effective 
means  of  enforcing  its  provisions.  That  act  relates 
only  to  common  carriers,  or  those  engaged  in  the 
transportation  of  freight  or  passengers  for  hire, 
and  the  Interstate  Commerce  Commission  has  for 
more  than  sixteen  j-ears  been  attempting,  with 
more  or  less  success,  to  insist  upon  a  strict  appli- 
cation of  its  terms  to  the  affairs  of  railroad  com- 
panies. There  is,  therefore,  but  little  reason  to 
hope  for  radical  improvement  from  a  mere  change 
in  the  method  of  enforcing  the  provisions  of  the 
old  law,  and  as  its  effects  upon  combinations  en- 
gaged in  other  lines  of  trade  must  necessarily  be 
indirect  and  secondary,  it  is  not  likely  to  afford  any 
material  relief  to  the  general  situation. 

The  Bureau  of  Corporations,  established  by  the 
last  Congress  in  connection  with  the  Department 
of  Commerce  and  Labor,  is  merely  empowered  to 
inquire  into  the  affairs  of  corporations  engaged 
in  commerce  among  the  states  and  to  collect  such 
information  as  it  can  concerning  them,  all  of  which 
it  is  required  to  report  to  the  President  of  the 
United  States  for  the  purpose  of  enabling  him  to 
recommend  to  Congress  the  enactment  of  such 
legislation  as,  in  his  opinion,  the  disclosed  state  of 
facts  may  seem  to  require.  As  now  constituted  it 
is  simply  an  information  bureau  for  the  conven- 
ience of  the  President,  but  into  what  it  may  ulti- 
mately develop,  and  what  real  powers  may  here- 


Trusts  and  Monopolies.  3 

after  be  conferred  upon  it,  is  a  matter  which  at 
this  time  can  only  be  conjectured.  The  considera- 
tion of  the  subject,  however,  will  doubtless  engage 
a  considerable  share  of  the  serious  attention  of  the 
Fifty-seventh  Congress,  and  the  constitutionality 
of  any  act  which  seeks  to  give  to  this  bureau  power 
to  interfere  with  the  affairs  of  any  individual  or 
corporation  whose  principal  business  is  not  directly 
connected  with,  or  a  part  of  interstate  commerce, 
will  be  certain  to  present  an  interesting  subject  for 
investigation  by  the  Supreme  Court  of  the  United 
States,  upon  which  it  is  safe  to  predict  that  more 
than  one  learned  opinion  will  be  written.  It  is 
clear,  therefore,  that  the  legislation  on  this  sub- 
ject thus  far  enacted  by  Congress  is  merely  in- 
tended as  preparatory  to  something  more  direct 
and  effective  which  is  expected  to  follow.  The 
establishment  of  this  bureau  for  the  purpose  of 
securing  information  relative  to  the  management 
and  operations  of  corporations  is  an  official  ac- 
knowledgment that  there  is  believed  to  be  some- 
thing radically  wrong  in  the  present  adjustment  of 
our  industrial  system,  and  that  the  facts  pertain- 
ing to  it,  and  the  remedies  required  to  preserve  it 
from  the  danger  of  self-destruction,  have  not  yet 
been  made  to  appear  sufficiently  clear  to  the  public. 
The  people,  then,  knowing  the  unavoidable,  but 
exasperating  delays  which  almost  invariably  attend 
the  inauguration  of  any  new  scheme  of  legislation^ 
should  bestir  themselves  to  determine  what  meas- 
ure will  best  serve  to  promote  the  general  welfare 
of  the  whole  country,  and  to  insist  upon  their  im- 
mediate adoption  and  enactment  by  these  to  whom 
the  task  of  framing  legislation  has  been  entrusted. 


4  Combinations, 

It  is  believed  that  the  general  confusion  whicH 
still  obscures  the  public  understanding  of  the  in- 
dustrial situation,  and  the  hesitation  and  indecision 
which  has  thus  far  marked  the  course  of  legisla- 
tion concerning  it,  arise  chiefly  from  a  failure  to 
properly  analyze  the  subject  and  to  comprehend 
clearly  the  natural  functions  and  effects  of  the  sim- 
ple elements  of  which  it  is  composed. 

The  modern  printing  press  into  which  paper  is 
fed  from  a  roll  and  which  returns  it  printed,  cut 
into  sheets  and  folded  ready  for  distribution  in  the 
familiar  form  of  newspapers;  the  commutating 
machine  which  by  merely  operating  a  few  keys, 
as  on  a  typewriter,  performs  the  most  difficult 
mathematical  operations  with  mechanical  case  and 
exactness;  and  the  watch  which  accurately  meas- 
ures time  to  a  fraction  of  a  second,  appear  wonder- 
ful to  those  who  are  not  familiar  with  their  con- 
struction, but  when  analyzed  they  are  found  to  con- 
sist of  a  combination  of  the  most  elementary  me- 
chanical powers,  the  uses  of  which  are  well  known 
to  every  schoolboy.  Each  of  these  machines  is 
found  to  be  simply  a  skillful  adjustment  of  wheels 
and  levers,  the  working  of  any  one  of  which  would 
attract  no  interest  whatever,  but  when  suitably 
connected  their  effects  may  sometimes  be  truly 
amazing.  The  phonograph  seems  to  be  a  most 
marvellous  contrivance  to  those  who  think  only  of 
its  power  to  reproduce  the  human  voice,  but  when 
examined  closely  it  is  discovered  to  be  merely  an 
application  of  the  simplest  principles  which  govern 
the  production  and  transmission  of  sound.  It  is 
precisely  the  same  with  the  contemplation  of 
economic  conditions.    If  we  see  only  the  complex 


Trusts  and  Monopolies.  5 

exterior  presented  by  a  social  movement  and  at- 
tempt to  judge  it  by  the  results  it  has  achieved, 
it  will  frequently  be  found  to  present  difficulties 
60  grave  as  to  seem  to  baffle  human  understanding. 
But  if  we  inquire  what  means  have  been  employed 
to  attain  these  ends,  it  will  be  found  that  this  great 
social  machine  is  nothing  more  than  the  develop- 
ment of  simple  relations  with  which  we  have  long 
been  familiar,  and  the  recognition  of  them  will 
enable  us  much  more  easily  to  master  the  intri- 
cate relations  arising  from  their  combined  opera- 
tion. It  is  the  hope  of  being  of  some  assistance 
in  removing  the  mystery  which  still  envelopes 
so  many  of  the  features  of  this  subject,  and  thus 
clearing  the  way  to  a  just  and  enlightened  solu- 
tion of  the  perplexing  problems  involved  in  it, 
that  has  led  to  the  writing  of  these  pages. 

The  dual  form  of  our  scheme  of  government 
under  which  the  regulation  of  the  varied  interests 
of  society  is  attempted  to  be  fairly  apportioned  be- 
tween the  state  and  federal  authorities,  makes  it 
exceedingly  difficult  at  times  to  determine  whether 
the  jurisdiction  over  a  given  subject  is  properly 
vested  in  the  one  or  the  other,  but  the  importance 
of  deciding  the  questions  correctly  and  preventing 
any  usurpation  of  powers  by  the  one  or  abandon- 
ment of  them  by  the  other,  and  of  insisting  upon 
a  strict  adherence  to  that  adjustment  of  rights  and 
obligations  which  was  prescribed  by  the  framers 
of  our  national  constitution,  cannot  be  over-esti- 
mated, for  upon  the  preservation  of  this  funda- 
mental principle  of  our  organic  law  depends  the 
stability  and  permanency  of  our  republic.  The 
duty  of  safeguarding  it  has  been  entrusted  to  the 


6  Combinations, 

whole  people,  and  from  them  must  come  the  brain 
and  the  muscle,  the  wisdom  and  the  courage,  which 
are  necessary  to  guide  the  nation  through  every 
danger  and  to  protect  it  from  all  harm.  Many 
nice  questions  have  arisen  since  the  adoption  of 
the  Constitution  of  the  United  States  in  which  the 
powers  of  Congress  and  of  the  state  governments 
have  been  considered,  and  some  of  the  greatest 
minds  that  our  country  has  produced  have  devoted 
their  best  efforts  to  the  discussion  and  settlement 
of  the  constitutionality  of  measures  in  which  the 
jurisdiction  of  the  state  and  national  govern- 
ments appeared  to  be  brought  into  conflict,  but  no 
subject  that  has  yet  been  proposed  has  promised 
material  for  a  more  interesting  and  profitable  in- 
vestigation, or  important  judicial  construction 
than  the  one  now  before  us.  The  responsibility  of 
determining  upon  the  proper  means  of  redressing 
wrongs  or  of  remedying  social  evils,  rests  upon  the 
people,  and  until  they  have  done  so,  they  cannot 
expect  their  representatives  to  enact  satisfactory 
laws.  Legislators,  at  their  best,  merely  reflect  the 
will  of  the  people,  and  until  that  will  is  made 
known  their  position  is  substantially  that  of  agents 
awaiting  instructions,  or  at  most  they  may  indulge 
in  the  passage  of  acts  which  serve  but  for  little 
more  than  temporizing  experiments.  No  laws, 
however  wise  or  good  they  may  be,  can  hope  to  be 
effective  under  a  republican  form  of  government 
unless  they  are  supported  by  the  common  people. 
It  behooves  us,  therefore,  to  study  the  conditions 
which  confront  us  that  we  may  be  prepared  to  in- 
telligently discharge  the  duties  of  American  citi- 
zenship, and  prove  faithful  to  the  trust  imposed  in. 


Trusts  and  Monopolies.  7 

IIS  by  the  Fathers  of  our  Country.  To  that  end 
we  shall  now  proceed  to  examine  some  of  the  de- 
tails of  the  most  absorbing  topic  of  the  day,  the 
one  subject  with  which  every  one  is  supposed  to  be 
familiar,  but  of  which  very  few  are  prepared  to 
give  a  satisfactory  account. 


8 


Combinations, 


CHAPTER  II. 


\F 


i^. 


THE   COMPETITIVE   SYSTEM. 

In  the  early  settlement  of  every  new  countn% 
individual  enterprise  has  been  obliged  to  go  forth 
to  contend  with  the  various  forces  of  nature;  to 
subdue  the  savage,  to  cut  down  the  forests,  to  ex- 
terminate the  animals  of  prey,  to  endure  the  hard- 
ships and  privations  of  every  kind,  to  encounter 
eickness  and  disease,  and  to  face  death  in  a  hun- 
dred forms  in  order  to  prepare  the  new-found  land 
for  the  requirements  of  civilized  man.  As  popu- 
lation increased  and  commimities  were  formed, 
this  same  individuality  and  independence  of  ac- 
tion led  to  the  adoption,  by  various  persons,  of  all 
the  numerous  occupations  that  are  necessary  to 
supply  the  wants  of  society. 

So  long  as  the  laborers  were  few  and  the  wants 
many,  the  ejfforts  of  all  were  required  to  supply 
the  demands  of  the  community,  and  there  was  no 
competition.  As  soon,  however,  as  the  needs  of  the 
people  began  to  be  in  a  measure  supplied  and  two 
persons  were  obliged  to  bid  against  each  other  for 
the  favor  of  the  community  in  any  particular  line 
of  trade  or  pursuit,  competition  had  set  in,  and 
what  is  now  known  as  the  competitive  system  had 
begun  to  operate. 


Trusts  and  Monopolies.  9 

In  its  early  stages  the  most  familiar  form  of 
competition  was  that  carried  on  between  the  store- 
keepers in  the  towns,  but  it  also  animated  the  strife 
between  the  producers  of  various  kinds  of  wares, 
and  with  the  development  of  the  factory  system, 
it  assumed  its  greatest  importance  and  attained  its 
fullest  development  in  connection  with  that  class 
of  business. 

The  competition  of  the  small  storekeepers  is 
more  or  less  familiar  to  every  one,  particularly  to 
those  who  have  been  raised  in  small  towns.  In 
large  cities  nothing  seems  ever  to  have  had  a  be- 
ginning. There  never  was,  apparently,  any  first 
store,  but  there  has  always  been  an  abundance  of 
them;  competition  is  sharp  and  incessant;  oppor- 
tunities of  every  description  are  plentiful;  condi- 
tions of  all,  kinds,  whether  for  good  or  evil,  seem 
to  be  highly  developed,  and  every  economic  prin- 
ciple appears  to  have  been  always  in  operation, 
while  in  the  small  town  there  are  many  who  remem- 
ber when  the  first  storekeeper  had  the  entire  trade 
of  the  village  all  to  himself.  He  knew  no  opposition 
and  could  conduct  his  business  to  suit  his  own 
pleasure.  He  need  go  to  no  expense  in  fitting  up 
his  store  to  make  it  attractive  or  inviting  to  the 
public,  nor  go  out  of  his  way  to  solicit  trade,  for 
those  who  desired  to  purchase  must  come  to  him. 
He  could  make  prices  to  suit  the  convenience  of  his 
own  business,  limited  only  in  a  measure  by  the  dis- 
tant markets  of  the  large  cities. 

This  independence,  however,  was  not  destined  to 
be  long-lived,  for  a  second  store  soon  appeared  in 
the  town.  The  new  aspirant,  in  order  to  secure 
business,  had  to  overcome  some  part  of  the  prestige 


lo  Combinations 


attained  by  the  older  merchant,  and  he  was  there- 
fore obliged  to  exert  himself  to  please  and  attract 
the  public.  He  usually  began  by  endeavoring  to 
give  an  inviting  appearance  to  his  store,  by  dis- 
playing greater  taste  in  the  selection  and  exhibi- 
tion of  his  wares;  he  strove  to  be  more  attentive 
and  obliging  to  his  customers,  offered  to  deliver  his 
goods  at  the  homes  of  purchasers  and  sent  agents 
out  to  solicit  orders.  He  also  in  many  instances 
cut  prices  and  thus  compelled  his  competitor  to 
sell  at  reasonable  figures  or  else  lose  his  trade  alto- 
gether. 

This  unusual  activity  on  the  part  of  the  new- 
comer was  not  without  its  effect  upon  the  older 
merchant.  He  was,  in  a  measure  at  least,  obliged 
to  meet  every  innovation  adopted  by  his  new  com- 
petitor, as  well  as  to  conform  to  his  reduced  prices. 
The  contest  having  once  begun,  it  continued  to  be 
urged  with  increasing  vigor,  just  as  in  a  game  of 
checkers  each  play  calls  for  a  corresponding  move 
on  the  part  of  the  other  party.  Each  strives  to 
take  every  possible  advantage  of  his  adversary,  and 
the  more  successful  he  becomes  the  greater  priv- 
ileges he  is  allowed ;  just  as  the  checker  which  has 
been  successfully  carried  through  the  forces  of  the 
opposition  may  disregard  many  of  the  rules  by 
which  the  others  are  restricted. 

New  fixtures  and  an  attractive  interior  presented 
by  one  store  called  for  equally  fine  fittings  and  a 
display  store-front  by  the  other.  More  clerks  and 
errand  boys  to  wait  upon  the  customers  of  the  one, 
was  met  by  the  delivery  wagon  to  serve  the  conven- 
ience of  those  of  the  other,  and  illumination  and 
conspicuous  display  of  wares  by  one,  led  to  adver- 


Trusts  and  Monopolies.  ii, 

tising  of  various  kinds  by  his  rival.  Each  vied 
with  the  other  in  his  efforts  to  procure  the  choicest 
goods  from  even  the  most  distant  markets,  and  the 
latest  and  most  inviting  patterns  were  placed  be- 
fore their  customers.  The  utmost  ingenuity  and 
incessant  labor  were  devoted  to  the  development  of 
the  art  of  collecting  merchandise  and  presenting  it 
in  an  attractive  manner  to  the  purchasing  public, 
and  every  convenience  that  genius  could  devise 
was  employed  to  bring  merchant  and  consumer 
closer  together.  . 

Other  competitors,  of  course,  entered  the  contest,  \ 
but  these  were  merely  so  many  additional  players,    I 
which  simply  added  zest  to  the  game.     Each  con- 
tributed his  might  to  spur  the  others  on,  but  was 
in  turn  compelled  to  keep  pace  with  them. 

It  not  infrequently  happened  that  in  the  bitter- 
ness of  competition  prices  were  reduced  so  low  as 
to  destroy  all  possibility  of  making  profit,  goods 
being  often  sold  below  cost  in  order  to  outdo  com- 
petitors. In  the  earlier  stages  of  the  development 
of  the  system,  however,  most  merchants  were  on  a 
comparative  equality  so  far  as  capital  was  con- 
cerned, and  since  neither  could  afford,  much  longer 
than  the  other,  to  conduct  his  business  at  a  loss, 
the  result  was  usually  a  cessation  of  hostilities,  suc- 
ceeded by  a  period  of  mutual  toleration  which 
proved  to  be  highly  beneficial  to  the  community; 
protecting  it  against  the  danger  of  extortionate  de- 
mands by  a  monopoly  on  the  one  hand,  and  secur- 
ing to  it  the  advantages  of  superior  service  induced 
by  competition  on  the  other. 

Larger  amounts  of  capital  soon  began  to  be  in- 
vested in  mercantile  business,  and  with  it  the  com- 


12  Combinations, 

petition  became  sharper  than  ever.  The  greatest 
resources  at  their  command  enabled  merchants  to 
attempt  many  things  which  had  hitherto  been  im- 
possible, and  provided  them  with  the  means  of 
carrying  the  competitive  warfare  against  the 
smaller  tradesmen  even  to  the  point  of  extermina- 
tion, for  they  knew  that  after  they  had  once 
driven  competition  from  the  field,  they  could  raise 
prices  to  such  a  point  as  would  speedily  restore  to 
them  all  the  profits  which  they  had  sacrificed  in 
the  competitive  struggle. 

The  instinct  of  self-preservation  soon  began  to 
lead  the  smaller  dealers  to  combine  in  order  to  re- 
sist the  attacks  of  their  more  powerful  competitors. 

I  Two  or  three  individuals  would  unite,  putting  their 

,  joint  resources  into  the  business,  and  would  thus 
for  a  time  be  able  to  continue  the  contest.  These 
partnerships  proved  popular  and  successful  for  a 
while,  but  like  everything  else  in  the  competitive 
world,  each  new  departure  merely  serves  as  a 
step  to  something  higher.  One  partnership  led  to 
the  formation  of  another  still  stronger,  and  so  they 
continued  to  increase  in  number  and  in  power 
until  they,  too,  were  found  to  be  inadequate  for  the 
requirements  of  the  trade. 

I  Combinations  capable  of  an  almost  unlimited 
number  of  individual  shareholders,  and  possessing 

1  much  greater  power  than  partnerships,  now  began 
to  be  formed.  They  were  known  as  stock  companies, 
or  corporations,  and  by  means  of  these  the  greatest 
aggregations  of  wealth  have  become  practicable 
and  the  exercise  of  the  most  stupendous  powers 
ever  known  to  the  world  has  been  made  possible. 
Corporations  now  began  to  supplant  the  individual 


Trusts  and  Monopolies.  13 

and  to  assume  control  of  trade.     The  advantages 
of  corporate  management  (among  which  were  the 
limited  liability  of  the  shareholders  and  the  greater 
facility  for  raising  capital)  were  so  important  in 
the  conduct  of  business  on  a  large  scale  that,  after 
the  first  prejudices,  which  always  retard  the  in- 
troduction of  a  new  system,  had  been  dissipated, 
the  organization  of  corporations  for  all  kinds  of 
purposes  became  quite  general.     The  formation  of   j 
a  company  in  one  line  of  business  compelled  the   j 
creation  of  others  to  compete  with  it  and  thus  the   « 
movement  spread  until  for  many  years  the  greater 
part  of  the  business  of  the  country  has  been  con- 
ducted by  corporations.    The  competition  begun  by 
individuals  possessing  little  capital  was  continued 
by  the  corporations  with  all  the  rigor  and  severity 
that  the  shrewdest  management  could  devise  and 
that  large  capital  and  great  power  made  possible. 
The  history  of  competition  among  manufacturers 
has  been  very  much  the  same  as  that  which  we  ? 
have  just  outlined  as  existing  between  the  venders  | 
of  their  products.    In  the  early  days  when  practi-| 
cally  all  manufactured  products  were  made  by  hand } 
labor,  the  same  rivalry  existed  between  the  indi- 
Oj'vidual  producers  which  has  since  been  developed 
.  ^  into  the  most  relentless  competition  between  giant 
^^|S  manufacturers,  though  of  course  it  was  not  mani- 
X  ^   f  ested  in  the  same  way. 

^  N  It  may  easily  be  supposed  that  the  competition. 

"^  between  the  early  producers  was  conducted  in  much 

the  same  way  as  that  between  rival  blacksmiths,  or 
those  engaged  in  any  other  of  the  occupations  com- 
monly known  as  hand  trades,  at  the  present  time, 
in  which  mechanical  skill,  natural  taste,  tact,  per- 


14  Combinations, 

sonal  characteristics,  and  accomplishments  are 
largely  relied  upon  to  secure  for  their  possessors  a 
fair  share  of  the  business. 

With  the  introduction  of  machinery  and  power, 
however,  substantial  advantages  in  production  be- 
gan to  be  substituted  for  mere  differences  in  in- 
i  ^        dividual  capabilities  as  a  means  of  extending  trade. 
y-^         The  adoption  of  the  factory,  or  coHDperative  system 
i    is.        I  of  production  in  which  many  persons  were  em- 
\   J^      i  ployed  in  large  establishments  with  the   aid  of 
*   ^  power  and  machinery,  afforded  so  many  important 

advantages  over  the  old  system  of  shop  work,  that 
^  it  speedily  compelled  those  engaged  in  the  manu- 

facture of  the  same  class  of  goods  either 
to  adopt  the  system  or  to  retire  from 
competition  with  those  who  had  done  so. 
Every  new  tool  or  piece  of  machinery  that 
was  devised  likewise  gave  to  those  who  first 
employed  it  a  material  advantage  over  all  com- 
petitors who  had  not  yet  done  so,  and  thus  com- 
pelled them  to  seek  its  aid  in  order  to  keep  pace 
with  the  times.  The  readiness  with  which  the 
latest  and  most  improved  appliances  were  adopted 
by  manufacturers,  and  the  passionate  fondness  of 
the  American  people  for  the  new  and  the  wonder- 
ful, have  stimulated  the  inventive  genius  of  the 
age  to  such  a  degree  of  activity  that  the  manufac- 
turing and  industrial  achievements  of  the  last  cen- 
tury have  become  the  wonder  of  the  world. 
I  The  same  evolution  in  the  form  of  organization 
(and  in  the  size  of  the  establishment^  which  we  have 
ialready  noted  in  relation  to  mercantile  business, 
has  also  taken  place  in  the  manufacturing  world. 
The  shop  in  which  the  proprietor  and  his  appren- 
$W\)^'  ^^^^'^     wPi^i^i^ 


) 


^ 


Trusts  and  Monopolies.  15 

tice  worked  together  at  the  bench  developed  into 
J  the  factory  in  which  many  persons  were  employed 
^  and  which  was  noisy  with  the  sound  of  the  re- 
volving wheels  of  machinery ;  ijinto  the  firm 
in  which  the  capital  of  two  or  more  Joint 
proprietors  was  invested,  and  which  employed 
a  great  number^of  men  and  still  more  exten- 
sive machinery ;  ^^d  finally  into  the  corporation 
in  which  the  proprietors  as  shareholders  may  be 
numbered  by  the  thousand,  which  may  control 
an  almost  unlimited  number  of  employees,  and  in 
whose  plants  the  most  marvellous  machinery  is  in 
operation. 

The  excessive  sharpness  of  competition  has,  at 
times,  led  to  (he  production  and  sale  of  inferior 
grades  of  goods  of  various  kinds,  and  numerous 
frauds  and  deceptions  have  been  practiced  by  un- 
scrupulous parties  in  their  efforts  to  maintain 
an  unequaled  competition.  In  some  cases,  how- 
ever, this  has  been  due  to  what  may  be  termed  the 
over-growth  of  the  competitive  system;  in  others, 
it  is  one  of  the  natural  evils  which  is  bound  to  re- 
sult from  individual  competition,  while  in  many  in- 
stances it  has  been  the  work  of  irresponsible  per- 
sons who  have  had  no  intention  of  acting  in  good 
faith,  and  whose  misdeeds  cannot,  therefore,  prop- 
erly be  charged  as  among  the  effects  of  the  eco- 
nomic system  which  chanced  to  be  in  operation  at 
the  time. 

These  large  corporations  which  had  now  assumed 
control  of  nearly  every  line  of  trade,  carried  on  the 
competitive  struggle  with  the  utmost  severity,  and 
emptoyed-FvnyTheans  that  ingenuity  could  invent 
to  undermine  and  destroy  their  competitors,  and  to 


i6  Combinations, 

drive  them  out  of  business,  but  finding  that  these 
means  failed  to  clear  the  field  of  opposition,  or 
growing  weary  of  the  struggle,  they  began  to  re- 
sort to  agreements  between  the  competing  concerns 
for  the  purpose  of  fixing  prices,  to  divide  terri- 
tory between  them,  etc.,  and  those  who  refused  to 
voluntarily  become  parties  to  these  arrangements, 
were  then  forced  to  join,  or  fight  the  united  strength 
of  the  combination. 

Such  has  been  the  origin  and  growth  of  what 
is  commonly  known  as  the  competitive  system.  If\ 
means  merely  the  independent  production,  manu- 
facture or  sale  of  any  commodity  by  several  indi- 
viduals, each  of  whom  is  striving  to  secure  a  larger 
share  of  the  trade  than  his  competitors,  and  who  is 
usually  willing  to  employ  every  means  at  his  com- 
mand to  attain  his  end. 

It  is  under  the  competitive  system  that  our 
country  has  attained  to  its  present  position  of 
wealth,  power,  and  influence  among  the  nations  of 
the  world ;  it  is  under  this  system  that  the  re- 
sources of  our  country  have  been  developed,  and  the 
hidden  treasures  of  the  earth  have  been  brought 
forth  to  swell  the  volume  of  that  ever-growing 
commerce  which  is  already  carrying  the  products 
of  our  workshops  and  of  our  land  into  the  remotest 
corners  of  the  earth.  It  is  under  the  stimulus  of 
competition  that  the  genius  of  our  people  has  made 
invention  after  invention  which  have  revolution- 
ized all  processes  of  production,  of  manufacture 
and  of  transportation,  have  greatly  increased  the 
efficiency  of  labor,  and  have  made  our  machinery 
and  the  equipment  of  our  factories  and  our  milh 
the  study  and  admiration  of  the  master  mechanics 


Trusts  and  Monopolies.  17 

throughout  all  parts  of  the  civilized  world.  Most 
of  us  have  been  taught  to  regard  the  state  of  uni- 
versal competition  as  the  normal  and  ideal  condi- 
tion of  the  industrial  world,  the^stTmulatrhg  force 
to  promote  and  hasten  its  extension  and  develop- 
ment, and  the  automatic  governor  to  regulate  and 
control  it  in  its  maturity. 

In  speaking  of  the  benefits  to  be  derived  from  . 

the  competitive  system^TiTTtVever,  we  have  always  \\\\ 
had  in  mind  the  competition  of  comparatively  equal  " 
forces.  While  the  opportunities  of  air  the  parties 
are  equal,  the  hope  is  ever  entertained  that  each 
may  be  able  to  excel  the  other,  and  all  are  inspired 
to  put  forth  the  best  work  of  which  they  are  capa- 
ble. If,  however,  a  material  advantage  be  given 
to  some  and  denied  to  others,  the  hope  of  the  less 
favored  is  gone  and  the  zest  is  taken  out  of  the  con- 
test, and  those  possessing  the  advantage  may  move 
leisurely  on  to  victory,  while  the  less  fortunate  are 
obliged  to  pursue  a  hopeless  struggle  for  existence. 

The  competitive  system  has  been  in  operation  in 
Europe  as  well  as  in  this  country,  but  there  has 
never  been  that  equality  of  opportunity  which  has 
existed  here.  The  greater  part  of  the  capital  has 
always  been  controlled  by  a  few  firms,  or  they  have 
been  favored  by  governmental  patronage  or  pro- 
tection, while  the  opposition  of  their  smaller  com- 
petitors has  not  been  sufficiently  strong  to  stimulate 
them  to  any  great  efforts.  Much  has  been  accom- 
plished along  old  established  lines,  and  some  im- 
provements have  been  made,  but  no  such  progress 
has  been  attained  as  has  characterized  the  develop- 
ment of  our  industries. 

It  is  the  same  spirit  of  individuality  and  in- 


//Il 


1 8  Combinations, 

dependence  of  action  which  led  the  adventurer 
forth  to  battle  with  the  uncouth  forces  of  nature, 
that  has  ever  since  directed  the  course  of  that 
competitive  struggle  which  has  sharpened  the  wits, 
inspired  the  genius,  and  spurred  into  activity 
every  faculty  of  our  people  and  developed  the 
varied  resources  of  our  country.  It  has  always 
led  the  way,  and  the  multitude  has  followed.  It 
has  suggested  every'  link  in  the  long  chain  of  im- 
provements reaching  from  the  rough  board 
counter  in  the  primitive  country'  store,  to  the  mer- 
cantile palace  in  the  large  city.  It  is  the  life  of 
competition,  and  competition  has  built  up  all 
the  great  industrial  institutions  of  to-day,  and 
made  possible  all  those  wonderful  results  which 
combination  is  now  securing  through  its  operation 
of  them.  Combination,  or  co-operation,  has  thus 
far  merely  taken  over  and  combined  the  properties 
created  and^tablisWd  by  competition.  It  has  in- 
troduced a  new  system  of  control,  and  effected 
numerous  economies  in  their  management,  but 
as  yet  it  has  added  nothing  distinctly  new  to  the 
means  of  production,  or  to  the  institutions  which 

I  mark  the  progress  of  the  world's  material  develop- 
ment. 
Competition  has  been  recognized  from  the  very 
earliest  times  as  the  natural  condition  of  trade  and 
the  safeguard  of  the  rights  of  the  consumers,  and 
the  common  law  has  for  centuries  been  very  severe 
and  emphatic  in  declaring  all  combinations  in  re- 
straint of  trade  to  be  contrary  to  public  policy  and 
therefore  to  be  prohibited.  Many  attempts  have 
been  made  to  form  combinations  to  agreements  for 
the  purpose  of  neutralizing  the  effects  of  competi- 


Trusts  and  Monopolies.  19 

tion  in  particular  lines  of  industry,  but  owing  to 
the  intervention  of  the  law,  or  the  want  of  good 
faith  on  the  part  of  the  contracting  parties,  they 
have  always  failed  in  their  purpose  until  within  the 
last  thirty  or  forty  vpars..  It  was  about  the  begin- 
ning ol  Ais  latter  period  that  combinations  in  re- 
straint of  trade  began  to  be  more  or  less  effective, 
and  the  evolution  of  the  modern  trns|  c^r  mnnnpoly-- 
began,  passing  as  it  did  through  all  the  various 
stages  of  development  from  the  mere  working 
agreement  to  the  mammoth  corporation,  the  chief 
forms  of  which  are  herein  elsewhere  described.  With 
the  success  of  these  combinations  came  the  decline 
of  competition.  This  system  has  been  supported  by 
th^"  "e^fyfriig  laws  and  by  new  statutes  made  espe- 
cially for  the  purpose,  by  the  long  and  continued 
usage  of  centuries,  by  the  apprehensions  of  the  peo- 
ple that  they  were  about  to  be  subjected  to  unjust 
and  unreasonable  oppression,  and  by  the  reluctance 
and  timidity  of  capitalists  to  risk  their  fortunes 
in  the  attempt  to  establish  a  new  scheme  of  indus- 
trial economy.  The  monopolistic  system,  on  the 
other  hand,  was  supported  by  the  prospect  of  large 
and  speedy  profits,  and  by  a  host  of  professional 
promoters  who  sought  to  acquire  large  personal 
profits  as  a  bonus  for  effecting  organization  among 
the  firms  engaged  in  a  particular  line  of  industry. 
iThe  struggle  between  the  two  systems  has,  there- 
fore, been  long  and  obstinately  contested,  and  it  is 
only  within  the  last  six  or  eight  years  that  the 
supremacy  of  monopoly  appears  to  have  become  es- 
tablished, and  the  rush  to  combination  has  become 
precipitate. 

The  benefits  of  the  competitive  system  are^  as 


-t 


20  Combinations, 

we  have  seen,  all  to  be  derived  from  a  state  of  com- 
parative equality  of  opportunity,  and  may  be 
summarized  as  follows :  it  stimulates  invention  and 
production;  it  insures  the  manufacture  or 
rendering  of  the  best  commodities  and  service 
to  the  consumer;  it  secures  and  maintains 
a  reasonably  low  price  to  the  purchaser;  it 
allows  the  payment  of  fairly  good  wages 
!to  the  producers,  and  to  all  employees,  and 
^affords  a  reasonable  profit  to  the  competitors. 
The  evils  of  the  system,  on  the  other  hand,  arise 
from  inequalities  of  competition, — disportionate  op- 
portunities discourage  enterprise; — it  induces  de- 
ception and  fraud  in  the  manufacture  and  sale  of 
goods;  it  causes  great  fluctuation  of  prices,  from 
exorbitantly  high  at  times  to  ruinously  low  at 
others.  Inequality  among  competitors  leads  to  the 
continual  cutting  of  the  wages  of  employees,  and 
in  many  instances  reduces  the  producers  of  raw 
materials  to  the  position  of  mere  servants  of  the 
large  consumers,  and  occasions  an  endless,  bitter 
strife  among  competitors  which  results  in  large 
profits  to  a  few,  a  mere  struggling  existence  to  more, 
and  ruin  to  many. 

The  competitive  system,  in  its  free  and  natural 
application,  has  proved  highly  beneficial ;  but  from 
its  abnormal  development,  or  what  may  be  termed 
the  transition  from  the  competitive  to  the  co- 
operative or  monopolistic  system,  many  evil  effects 
have  resulted  and  numerous  abuses  have  arisen  for 
which  it  is  very  desirable  that  remedies  shall  be 
found  either  by  the  complete  adoption  of  the  sys- 
tem to  which  the  transition  is  leading  or  by  suit- 
able regulation  and  restriction  upon  the  existing 


Trusts  and  Monopolies.  21 

Bystem.  Whether  we  consider  the  present  indus- 
trial movement  to  be  the  substitution  of  a  new  sys- 
tem of  monopoly  for  the  old  system  of  competition, 
or  consider  it  to  be  merely  the  natural  and  logical 
,  development  of  the  competitive  system,  the  result 
is  the  same,  and  the  fact  remains  that  competition 
is  rapidly  giving  way  in  all  lines  of  industrial 
activity  to  a  system  of  co-operative  control  or 
monopoly,  and  if  any  of  the  good  features  of  com- 
ipetition  are  to  be  preserved  in  order  to  serve  as  a 
check  upon  the  absolute  power  of  a  unified  control 
of  trade,  it  must  be  through  the  aid  of  wise  and 
judicious  legislation. 


^j-  ~- 


22  Combinations, 


CHAPTER  III. 

OBJECTS  OF  COMBINATIONS. 

Among  the  principal  causes  which  have  lad  to 
the  formation  of  trusts  and  combinations,  may  be 
mentioned  the* sharpness  of  competition;  ^the  ex- 
haustion of  many  of  the  sources  which  have  hitherto 
offered  large  speculative  gains  ;^the  lowering  of  the 
rates  of  interest  upon  money  ;*"  the  financial  and 
business  panic  of  1893;**' and  the  prospect  oi_se« 
curing  larger  profits  by  f^cqiiiring  rontrol  of  the 
various  necessities  of  life  and  then  conducting  the 
production  and  manuiactjli£— Qf__them_upgn  the 
largest  possil ' 

Competition  had  been  carried  to  such  an  extent" 
in  many  lines  of  trade  that  profits  were  reduced 
to  a  very  low  margin.  Many  manufacturers  found 
it  difficult  to  meet  the  running  expenses  of  their 
business,  and  were  rapidly  becoming  discouraged. 
The  future  gave  no  promise  of  relief,  but  seemed 
rather  to  have  only  greater  trials  in  store  for  them, 
and  any  alternative  that  promised  hope  of  improve- 
ment was  welcomed  by  those  who  saw  only  loss  and 
disaster  awaiting  them. 

The  completion  of  various  public  works,  such 
as  the  great  railway  systems  of  the  country,  in  the 
construction  of  which  large  sums  of  money  were 
employed,  and  the  gradual  payment  of  the  national 


Trusts  and  Monopolies.  23 

debt,  all  of  which  released  many  millions  of  dol- 
lars annually,  served  to  increase  the  volume  of  capi- 
tal seeking  investment  and  thus  directly  tended  to 
lower  the  rates  of  interest. 

^  This  lowering  of  the  rates  of  interest  and  the 
closing  of  many  fields  in  which  fancy  profits  had 
formerly  been  gathered,  directed  attention  to  the 
more  commonplace  articles  of  everyday  consump- 
tion, and  the  possibilities  of  industrial  develop- 
ment as  applied  to  these  commodities  began  to  be 
seriously  considered. 

The  panic  of  1893  had  reduced  most  of  the  in- 
dustrial institutions  of  the  country  to  a  state  of 
great  financial  distress,  which  made  them  an  easy 
prey  to  those  who  had  studied  the  opportunities 
presented  by  large  scale  production,  and  who  were 
able  to  control  a  sufficient  amount  of  capital  to 
take  advantage  of  them. 

Among  the  benefits  to  be  deriverl  from  fh^  o^vn^ 
_biiiatiQns_of  manufacturing  establishments,  the  fol- 
lowing have  been  most  strongly  emphasized  by  cor- 
poration promoters  and  those  who  have  been  par- 
ticularly active  in  bringing  together  the  various 
elements  which  constitute  the  great  industrial  com- 
binations of  to-day :  \'the  reduction  of  fixed  chameg  "^ 
such  as  the  amount  paid  for  salaries  of  superSi- 
tendents,  foremen,  bookkeepers,  salesmen  and 
others,  whose  services  are  usually  required  to  be 
retained  throughout  the  year ;  1  a  substantial 
savin^^inrent  or  in  the  amount  of  interest  required 
fobechafged  upon  capital  invested  by  diminish- 
ing the  number  of  establishments  to  be  maintained ; 
3  a  decrease  in  the  cost  of  repairs  and  qpexatipn  by 
employing  a  smaller  lEumfeoT  planfsand  avoid- 


24  Combinations, 

ing  the  duplication  of  machinery,  by  -using  only 
the  modern  appliances  and  by  working  them  to  the 
most  full  limit  of  their  capacity ;  Ha  material  reduc- 


tion  in  the  relativp  pYpfiT^gpnfljyhj-j  heaTand  power, 
and  ventilation  ;^the  distnHution  of  orders  so  that 
the  goods  may  be  produced  at  the  points  most  con- 
venient for  manufacture,  transportation,  and  de- 
livery;^ the  power  to  procure  raw  materials  in  such 
markets,  and  in  such  quantities  as  will  enable  the 
purchasers  to  secure  the  most  favorable  terms  ;7the 
superior  opportunities  presente3  for  advertising 
their  products,  and  of  affording  such  inducements 
to  the  trade  as  would  secure  for  the  combination 
a  virtual  monopoly  of  the  business  and  enable  it 
to  regulate  and  maintain  prices^^  and  the  prospect 
of  being  able  to  extend  its  trade  into  foreiom  mar- 
kets, thus  opening  up  new  sources  of  profit. 

The  contemplation  of  the  possibilities  of  com-' 
bination,  as  suggested  by  the  plants  just  indicated, 
coming  as  it  did  at  a  time  when  so  many  considera- 
tions seemed  to  necessitate  the  abandonment  of  the 
position  hitherto  maintained,  led  to  the  unprec- 
edented rush  to  combination  which  succeeded  so 
closely  upon  the  panic  of  1893.  It  may,  therefore, 
be  useful  to  examine,  somewhat  in  detail,  the  vari- 
ous objects  which  these  combinations  seek  to  ac- 
complish, so  that  we  may  better  understand  their 
effects,  and  be  able  to  discern  the  proper  remedies 
of  restrictions  to  be  applied  to  them. 

The  minimizing  of  expenses,  the  elimination  of 
waste,  and  the  control  of  the  market,  are  the  ideals 
of  the  modern  corporation. 

In  the  operation  of  small,  independent  estab- 
lishments the  services  of  proprietors,  managers,  or 


y 


Trusts  and  Monopolies.  25 

corporation  officers  are  to  be  considered  in  conneC' 
tion  with  each,  and  the  smaller  the  output,  the 
greater  will  the  relative  cost  of  their  salaries  ap- 
pear. Foremen  or  superintendents  have  also  to  be 
employed  varying  in  number  according  to  the  size 
of  the  plant  and  the  variety  of  the  work  to  be  done. 
It  is  seldom  found  possible  to  place  these  in  charge 
of  as  large  a  number  of  men  as  they  are  capable  of 
directing,  and  to  just  the  extent  that  the  service 
rendered  falls  short  of  their  full  capacity,  are  their 
salaries  wasted  to  their  employers.  It  is  the  same 
as  though  an  ordinary  mechanic  would  do  only 
three-quarters  of  a  day's  work,  and  draw  a  full 
day's  pay.  Most  of  these  establishments  have  also 
been  obliged  to  close  down  for  a.  longer  or  shorter 
•period  at  least  once  a  year,  and  it  is  usually  neces- 
sary to  retain  these  foremen  or  superintendents  on 
the  pay  roll,  thus  creating  another  element  of  waste 
which  must  be  made  up  by  increasing  the  cost  to 
the  consumer  of  the  manufactured  article.  In 
very  large  corporations  or  combinations,  however, 
'one  set  of  officials  will  discharge  the  same  duties 
.which  many  were  required  to  perform  for  the  sev- 
eral smaller  institutions  which  have  been  absorbed 
by  it.  Superintendents  and  foremen  will  be  as- 
signed to  departments  in  which  their  capacities 
will  be  taxed  to  the  utmost,  and  having  secured  a 
virtual  control  of  a  large  percentage  of  the  trade, 
the  plants  may  be  kept  more  steadily  employed, 
thus  eliminating,  as  far  as  possible,  all  waste  in 
the  directions  just  indicated. 

Every  business  necessitates  a  certain  amount  of  , 
office  work,  such  as  bookkeeping,  correspondence, 
billing,  etc.,  which  require  the  services  of  bookkeep- 


26  Combinations, 

ers,  clerks,  and  steDographers,  and  as  much  of  this 
work  is  the  same  whether  the  output  be  ten  thou- 
sand or  one  million  dollars  per  annum,  it  is  ap- 
parent that  the  cost  of  office  work  is  relatively 
much  greater  for  small  establishments  than  for 
large  ones.  As  the  numerous  independent  concerns 
engaged  in  a  particular  business  are  gathered  into 
combinations  or  into  huge  corporations,  the  cost  of 
office  service  is  greatly  reduced  by  dispensing  with 
the  several  sets  of  books  formerly  required,  and 
keeping  but  one  set,  which  may  comprehend  the  en- 
tire business  transactions  of  the  combination,  and 
yet  require  the  services  of  only  one  competent  book- 
keeper and  a  few  assistants,  thus  displacing  most 
of  the  skilled  accountants  hitherto  employed  by  the 
individual  firms.  The  clerical  work  has  also  been 
systematized  so  that  the  amount  formerly  done  in 
many  offices  can  now  be  performed  in  one  with  a 
much  smaller  force  of  help,  and  the  waste  in  office 
service  has  been  reduced  to  a  minimum. 

In  the  competition  of  independent  manufactur- 
ers the  sale  of  their  products  has  been  chiefly  ef- 
fected by  means  of  traveling  salesmen  who  were 
employed  to  exhibit  them  throughout  the  country. 
The  salaries  paid  to  these  men  have  usually  been 
large,  their  hotel  and  railway  expenses  have  been 
high,  and  while  they  seem  to  be  a  necessity  of  the 
system  under  which  they  were  employed,  yet  their 
maintenance  added  materially  to  the  cost  of  goods 
to  the  consumer.  As  these  establishments  unite 
into  larger  corporations  and  the  competition  be- 
tween them  disappears,  the  necessity  for  traveling 
salesmen  likewise  ceases  to  exist,  and  the  saving 
of  their  salaries  and  expenses,  alone,  amounts  to 


Trusts  and  Monopolies.  27 

an  important  item  to  the  combination.  The  unit- 
ing of  the  competing  firms  compels  the  merchant 
to  seek  for  the  goods  which  he  desires  to  purchase, 
so  that  with  the  services  of  a  few  salesmen,  just 
sufficient  to  meet  the  convenience  and  necessities  of 
the  trade,  the  combination  will  be  able  to  do  just 
as  much  business  as  did  its  component  parts,  and 
the  saving  of  this  expense  will  be  clear  profit  to  the 
corporation.  Mr.  P.  E.  Dowe,  President  of  the 
Commercial  Travelers'  National  League,  testifying 
before  the  Industrial  Commission  in  1899,  esti- 
mated the  amount  saved  in  this  way  alone  to  have 
been  one  hundred  fifteen  million  dollars  per  an- 
num. 

The  rent  account,  or  its  equivalent,  the  interest 
to  be  charged'on  the  capital  invested  in  the  build- 
ings and  grounds  occupied,  is  always  an  important 
item  in  the  expense  of  manufacturing  establish- 
ments, and  like  most  other  things  in  business,  the 
more  space  they  require  the  cheaper  it  can  be  had. 
Thus,  by  merging  a  number  of  small  concerns 
into  one  large  corporation,  it  not  only  becomes 
practicable  to  use  only  large  buildings  at  relatively 
small  rental,  but  in  most  instances,  the  number  of 
establishments  may  be  reduced  and  many  of  the 
original  plants  abandoned.  The  rent  account  will 
therefore  be  greatly  reduced,  while  the  output 
will  not  thereby  be  necessarily  diminished.  la 
the  Twelfth  Census  of  the  United  States, 
Volume  Seven,  Manufacturers,  Part  One,  it 
is  shown  that  two  thousand  two  hundred 
sixteen  manufacturing  plants  were  controlled 
by  one  hundred  eighty-five  industrial  com- 
binations, of  which  number  one  hundred  seventy- 


28  Combinations, 

six  were  reported  as  idle  during  the  census 
year.  The  cost  of  light,  heat,  ventilation,  and 
power,  will  also  be  much  less  owing  to  the  de- 
crease in  the  number  of  buildings  to  be  supplied, 
and  the  greater  compactness  and  convenience  of 
the  space  occupied  by  the  work. 

Where  there  are  many  concerns  engaged  in  the 
manufacture  of  one  particular  line  of  goods,  great 
inecjualities  will  always  be  found  in  the  equipment 
otthe  several  plants.  Tli^}/  Wuru  Ublablij^R^d  at — 
different  times  and  each  was,  perhaps,  at  the  time, 
provided  with  the  best  appliances  of  the  day,  but 
the  natural  tendency  of  those  who  have  already  in- 
vested large  amounts  of  capital  in  their  business, 
to  resist  the  introduction  of  new  machinery  which 
would  put  them  to  still  greater  expense,  coupled 
with  the  disposition  to  use  the  old  as  long  as  it  can 
-possibly  be  made  to  serve  the  purpose,  generally 
results  in  a  very  wide  difference  in  the  productive 
power  of  the  various  plants  at  any  one  time.  If 
all  the  establishments  engaged  in  a  given  line  of 
production  were  constantly  to  adopt  all  the  new 
appliances  that  were  proposed,  the  expense  of  doing 
so  would  be  very  great,  and  must  temporarily,  at 
least,  add  to  the  cost  of  manufacture ;  yet  if  any 
refused  to  go  to  that  expense,  they  would  be  obliged 
to  compete  at  a  disadvantage,  which  must  result  in. 
a  reduction  of  their  profits,  and  possibly  in  loss.  In 
the  case  of  a  large  corporation,  however,  in  which 
all,  or  most  of  these  concerns  have  been  merged, 
only  the  best  machinery  would  be  retained,  in  the 
first  place,  and  as  improvements  are  introduced, 
the  purchase  of  one  set  will  often  suffice  to  do  the 
€ame  work  for  which  many  would  be  required  to  be 


Trusts  and  Monopolies.  29 

provided  under  independent  management.  As  we 
have  before  remarked,  the  lack  of  orders  usually 
requires  small  factories  to  close  down  at  more  or 
less  frequent  intervals,  which  not  only  occasions  a 
loss  of  the  service  of  employees,  but  the  loss  of  the 
v.se  of  the  machinery  as  well;  whereas  in  a 
large  establishment,  more  steady  employment 
makes  it  possible  more  nearly  to  get  the  full  use 
of  the  machinery,  and  it  therefore  requires  less 
to  accomplish  the  same  results. 

In  the  production  of  heavy  and  bulky  commodi- 
ties, the  location  of  the  plant  and  the  cost  of  trans- 
portation, both  of  the  raw  materials  and  of  the 
ifinished  products,  have  much  to  do  wifli  restrict- 
ing the  trade  of  an  independent  establishment  to 
a  limited  section  of  the  country;  whereas  a  large 
combination  operating  several  widely  scattered 
plants  may  so  distribute  its  orders  that  the  goods 
may  be  manufactured  in  those  factories  most  con- 
venient to  the  place  of  delivery,  thus  reducing  the 
item  of  freight  charges  to  the  minimum  and  secur- 
ing a  material  advantage  over  its  more  distant 
competitors.  Mr.  John  W.  Gates,  Chairman  of 
the  American  Steel  and  Wire  Company,  testifying 
of  the  affairs  of  that  company  before  the  Indus- 
trial Commission  in  1899,  says :  "The  cross  freight 
saving  is  quite  an  important  item.  I  should 
think  the  cross  freights  would  amount  to  half 
a  million  or  one  million  dollars  a  year.  It  is  a 
saving  in  that  particular.^' 

There  is,  perhaps,  no  fact  more  familiar  to  com- 
mon experience  in  the  mercantile  world  than  that 
the  larger  the  quantity  of  material  required,  the 
more  favorable  the  terms  on  which  they  may  be  se- 


30  Combinations, 

cured.  The  advantages  of  purchasing  in  large 
quantities  may  in  some  measure  be  diminished  in 
cases  in  which  it  is  sought  to  exhaust  the  market,  or 
where  a  monopoly  has  obtained  control  of  the  ma- 
terials desired,  but  these  are  the  exceptions  and 
not  the  rule.  The  advantages  to  be  derived  from 
large  purchases  arise,  in  the  first  place,  from  the 
fact  that  the  amount  of  capital  involved  in  the 
transaction  is  sufficient  to  warrant  the  buyer  in  re- 
sorting to  distant  and  even  to  foreign  markets  if 
need  be,  to  secure  more  favorable  rates.  In  the 
next  place,  the  requirements  of  the  business  enable 
him  to  make  contracts  for  large  quantities  of  ma- 
terials to  be  delivered  at  stated  times  in  the  future, 
thus  securing  regularity  in  the  supply,  and  almost 
invariably  obtaining  lower  prices;  and  finally  as 
the  scope  of  the  establishment  expands,  it  may 
even  acquire  and  operate  the  sources  from  whence 
its  raw  materials  are  derived.  This  last  arrange- 
ment would  secure  to  it  the  benefit  of  all  profits 
that  might  otherwise  go  to  the  dealers  in  crude 
products,  and  render  it  practically  independent  of 
"all  other  considerations  save  the  labor  that  it  must 
employ,  and  the  market  in  which  it  must  sell.  The 
United  States  Steel  Corporation  affords  a  conspicu- 
ous instance  of  the  development  of  this  feature  of 
industrial  economy,  though  others  might  be  re- 
ferred to.  The  small  manufacturer,  on  the  other 
hand,  is  ordinarily  compelled  to  purchase  in  the 
local  market.  As  his  business  is  small  and  usually 
irregular,  he  cannot  contract  for  any  great  quantity 
of  materials  in  advance  and  is  therefore  frequently 
made  the  victim  of  his  own  necessities  and  obliged 
to  purchase  as  it  is  required,  regardless  of  the  con- 


Trusts  and  Monopolies.  31 

dition  of  the  market ;  and  far  from  hoping  to  con- 
trol the  sources  of  his  supplies,  the  smallness  of 
his  orders  leaves  him  almost  entirely  at  the  mercy 
of  the  local  producers. 

A  large  combination  or  corporation  with  plenty 
of  capital  at  its  command  can  afford  to  adopt  many 
nueans  of  -advertising,  and  of  introducing  its  wares 
that  would  be  wholly  heyond  the  reach  of  a  smaller 
concern.  The  large  volume  of  its  business  would 
in  many  instances  enable  it  to  secure  special  rates 
and  favors  from  transportation  companies,  which 
would  give  it  a  material  advantage  over  its  competi- 
tors, and  by  reason  of  these,  and  the  several  econ- 
omies possible  to  large  scale  production  which  we 
have  just  enumerated,  it  might  easily  undersell 
its  smaller  rivals.  This  it  may  do  for  a  longer  or 
shorter  time  according  as  its  design  may  be  to 
drive  them  out  of  business  entirely,  or  merely  to 
take  away  a  certain  portion  of  their  trade;  but  in 
either  case,  it  can  readily  place  itself  in  a  position 
to  dictate  prices. 

The  many  advantages  thus  secured  to  combina- 
tions of  manufacturing  establishments  enable  them 
not  only  to  control  the  home  trade,  but  to  invade 
the  foreign  markets  as  well,  and  'fo  sell  in  every 
part  of  the  world  iii  competition  with  the  older 
manufacturers  of  Europe.  To  secure  these  mar- 
kets it  has  been  necessary  to  expend  large  sums 
of  money  in  sending  agents  to  all  parts  of  the  world 
to  introduce  their  goods,  and  to  compete  with  the 
representatives  of  European  houses,  but  our  large 
corporations  are  already  doing  this,  and  that  they 
are  meeting  with  success  in  their  efforts  to  find 
sale  for  their  goods  in  foreign  lands  is  amply  at- 


32 


Combinations, 


tested  by  the  government  records  of  the  exports  of 
manufactured  articles  from  this  country  which 
amounted  to  $403,890,763  in  the  year  1902. 

A  better  appreciation  of  the  rapidity  with  which 
this  foreign  trade  has  grown  within  the  last  few 
years  may  be  derived  from  an  inspection  of  some  of 
the  figures  presented  in  the  tables  prepared  for  the 
j4nnual  Review  of  the  Foreign  Commerce  of  the 
United  States,  and  Summary  Tables  of  Commerce 
and  Production  for  the  year  ending  June  30,  1902, 
by  the  Bureau  of  Statistics  of  the  Treasury  De- 
partment of  the  United  States.  The  values  of  the 
principal  articles  of  domestic  manufacture,  by 
classes,  exported  from  the  United  States  is  there 
shown  to  have  been  as  follows  for  the  years  indi- 
cated: 

Iron   and    steel 1890 $23,542,208 

1900 121,913,548 

1902 98,r)52,562 

Copper     1890 2.,S49..31J 

1900 57.Sr>2.9(iO 

1902 41.21S.87.S 

Agricultural    Implements 1890 3.859.184 

1900 16.099,149' 

1902 16.2S0.740 

Wood    manufactures 1890 6.509,645 

1900 11,232.838 

1902 11,617,690 

Mineral    oils,    refined 18'.>0 44.658.854 

1900 68,247.588 

1902 66,218.004 

Chemicals,  drugs,  dyes,  etc 1890 5,424.279 

1900 12,132.373 

1902 12,141,011 

Leather,    manufactures    of 1890 12,438.847 

1900 27,293.010 

1902 29,798.323 

Cotton   manufactures 1890 9,999,277 

1900 24,003,087 

1902 32,108,362 

Paraffin    and    paraffin    wax 1890 2,408,709 

1900 8.602.723 

1902 8  8.5S  844 

Paper,  and  manufacturea  of 1890.'!!!!.'!!       l!226!686 

1900 6.215.833 

1902 7,312,030 


Trusts  and  Monopolies.  33 

It  may  also  be  seen  from  the  same  report  that 
the  total  exports  of  domestic  manufactures  in- 
creased only  twelve  and  eighty-one  hundredths  per 
cent,  from  1877  to  1890,  while  during  the  period 
from  1890  to  1900  they  increased  one  hundred 
eighty-seven  and  twelve  hundredths  per  cent. 

This  remarkable  showing  of  the  development  of 
the  export  trade  of  our  American  manufacturers 
would  seem  to  afford  the  most  convincing  evide];ice 
that  combinations  have  succeeded  in  effecting  many 
of  the  results  which  they  sought  to  accomplish, 
through  large  scale  production,  and  it  will  not  be 
necessary  to  say  anything  further  on  that  point. 


34  Combinations, 


CHAPTER  IV. 

FORMS    OF    ORGANIZATION. 

The  foregoing  considerations  having  led  capital- 
ists to  look  to  combination  as  a  hopeful  means  of 
securing  larger  profits,  and  having  convinced  them 
that  the  advantages  offered  were  sufficient  to  war- 
rant the  trial  of  so  new  a  system,  the  next  thing  to 
be  inquired  into  was  thp  form  of  organization  to  be 
adopted. 

In  considering  the  subject  of  organization,  we 
might  very  properly  begin  our  inquiry  with  the 

-^fiyst  combination  formed-between  two  individuals 
for  the  purpose  of  engaging  in  business  or  con- 
ducting some  other  enterprise  which  was  beyond 
the  capacity  of  either  to  undertake  alone,  for  ihe 
modfiULCorppration  is  merely_the  Jast^tage  j£t>at- 
tainod  in  the  development  of^thatHrstjinion.  The 
vjcombination  "Whidi-^we  have  now  m  mind,  however, 

/is  that  of  a  number  of  busing  units,  many  of 
which  have  long  been  established,  and  each  of 
which  had  certain  rights  or  interests  which  were 
sought  to  be  preserved  under  the  new  form  of  or- 
ganization. Among  the  concerns  which  sought  to 
be  consolidated,  many  .were  the  property  of  indi- 
vidual proprietors,  others  were  partnerships,  and  a 
large  number  were  corporations.    It  had  long  been 


Trusts  and  Monopolies.  35 

the  policy  and  purpose  of  the  laws  of  many  of  the 
states  to  discourage  and  prevent  the  merger  or 
affiliation  of  any  kind  between  corporations,  and 
this,  together  with  the  natural  desire  of  proprie- 
tors to  wish  to  retain  the  largest  possible  degree  of 
control  over  their  property,  led  them  to  seek  to  de- 
vise some  form  of  organization  which  would  pre- 
serve in  the  largest  measure  the  identity  of  the 
uniting  concerns. 

The  dominant  idea  in  all  the  early  attempts  at 
combinations  was,  therefore,  to  secure  united  action^ 
and  control  of  a  particular  line  of  business,  and  at 
the  same  time  causing  the  _ least  possible  inter- 
ference with_  the__affaira-.oiLJiie_Jndivid]ial  _estab- 

IjshTTipnfs  .engaged  in  it. The  first  and  simplest 

forrp  of  organization  attempted  was  that  of  the 
working  agreement  by  which  the  several  concerns 
Engaged  m  a  certain  business  undertook  to 
maintain  certain  established  prices  or  rates,  or  to 
conform  to  other  regulations  as  to  the  conduct  of 
their  affairs.  This  left  the  management  of  the 
several  estaWi^hmeMs^ntirelxinJhe  hands  ill  their 
proprietors^  restricted  only  by  the  terms,  of  the 
agreement,  and  in  that  respect  fulfilled  the  ideal  of 
the  form  of  organization  sought.  These  agree- 
ments, however,  were  in  the  nature  of  restraint  upon 
trade,  and  odious  to  the  law,  and  as  they  were  like- 
wise repulsive  to  the  public,  the  fact  of  their  exist- 
ence was  obliged  to  be  kept  secret,  and  it  was 
difficult,  therefore,  to  detect  those  who  chose  to 
violate  their  terms.  As  the  conditions  of  these 
agreements  were  left  to  be  performed  by  each  of  the 
members  in  connection  with  the  conduct  of  the  af- 
fairs of  his  private  business,  it  is  easy  to  suppose 


36  Combinations, 

that  many  jdelded  to  the  temptation  to  cut  prices 
or  otherwise  to  violate  their  provisions  in  order  to 
secure  the  trade  of  some  desirable  customer.  Since 
the  aid  of  the  courts  could  not  be  invoked  to  en- 
force these  contracts,  these  combinations  have  been 
obliged  to  depend  for  their  preservation  upon  the 
good  faith  of  their  members,  and  this  has  usually 
been  found  to  be  a  very  poor  anchor  upon  which  to 
clepend  in  commercial  affairs. 

The  great  freedom  of  individual  action  allowed 
by  this  form  of  organization  together  with  its  ina- 
bility to  command  the  obedience  of  its  members, 
soon  made  it  apparent  that  this  was  not  the  form 
of  organization  required  for  great  undertakings 
in  which  unity  of  purpose,  and  promptness  and  de- 
cision of  execution  were  indispensable,  and  other 
modes  of  combination  began  to  be  sought. 

The  working  agreement,  however,  is  the  simplest 
means  of  bringing  together  the  numerous  con- 
cerns engaged  in  any  particular  business,  and  as 
may  be  supposed,  in  spite  of  its  many  defects,  it 
has  been  more  frequently  employed  than  any  other. 
The  ease  with  which  these  agreements  may  be  ef- 
fected even  in  defiance  of  the  laws  which  seek  to 
suppress  them,  renders  them  particularly  conveiji- 
ent  in  those  cases  in  which  complete  consolidation 
is  not  desired,  for  it  is  considered  that  even  though 
individuals  may  at  times  disregard  their  provisions, 
yet  in  the  main  they  will  be  adhered  to,  and  many 
of  the  benefits  of  combinations  may  be  secured. 

While  other  and  more  perfect  forms  of  organiza- 
tion have  been  devised,  some  of  which  have  openly 
and  successfully  withstood  the  numerous  assaults 
made  upon  them  by  those  who  regard  combination 


Trusts  and  Monopolies.  37 

among  industrial  institutions  as  an  unmitigated 
€vil,  the  secret  agreement  has  continued  to  be  em- 
ployed in  many  quarters,  and  is  still  the  basis  of  a 
substantial  imion  in  many  branches  of  trade  in 
which  no  combination  is  generally  supposed  to 
exist.  The  officers  representing  an  association  of 
the  coal  mine  operators  of  Indiana  and  Illinois 
were  recently  indicted  for  regulating  the  coal  busi- 
ness in  that  way,  and  it  was  openly  charged  at  the 
time  that  hundreds  of  similar  associations  and 
agreements  might  be  found  ^  connection  with 
nearly  every  important  line  of  trade. 

The  next  mode  of  combination  adopted  was  an 
agreement  bj  which  the  market  was  apportioned 
between  the  ..seyeral  esiabljShments,  each  being  re- 
quired to  confine  its  trade  within  the  territory  as- 
signed to  it.  In  this  form  of  organization,  the^ 
combination  assumed  more  direct  control  over  its 
members  than  under  the  simple  agreement,  and 
while  it  was  still  unable  to  invoke  the  assistance 
of  the  courts,  or  to  summarily  enforce  its  com- 
mands, yet  the  transgressions  of  offenders  might 
much  more  easily  be  detected  and  modes  of  pun- 
ishment could  be  devised.  The  coal  dealers'  asso- 
ciation, to  which  we  have  just  referred,  was  said 
to  have  employed  this  form  of  regulation,  also. 
The  trade  of  a  particular  town  or  section 
of  a  city  or  of  the  country  was  allotted 
to  a  certain  dealer,  and  all  those  who  de- 
sired to  purchase  were  obliged  to  resort  to  him> 
for  the  mine  owners  refused  to  sell  their  coal  to 
any  other  dealers  in  the  same  territory.  These 
agreements  are,  however,  also  illegal,  and  they  will 
be  speedily  dissolved  by  the  courts  wherever  their 


38  Combinations, 

existence  can  be  proved.  It  is  necessary,  therefore, 
to  preserve  the  strictest  secrecy  regarding  them  and 
their  affairs,  and  this,  together  with  the  same  ob- 
jections which  apply  to  the  other  class  of  agree- 
ments to  which  we  have  referred,  serves  to  render 
them  undesirable  and  unsatisfactory  forms  for  per- 
manent organization. 

y  Another  form  of  combination  is  that  by  which 
the  business  of  the  country,  or  of  the  district 
designed  to  be  affected,  is  apportioned  among  the 
several  partie3_.to  _ the. ..agregjiientt-JL. certain  per- 
centage j>eing  assigned  to  each  according  to  it* 
capactfy,'  or  othenjagreed  mode  oi  dixision.  It  dif- 
fers from  the  form  last  shown  in  that  it  does  not 
attempt  to  restrict  the  sphere  of  operation  of  the 
several  estabTisHmentsr~IirTeaves  each  member  free 
\  ""tSTcolrtxiCt  the  details  of  his  business  in  his  own 
'k  way,  but  requires  him  to  bring  the  proceeds  into  a 

■  common  fund  from  which  each  draws  his  allotted 
percentage,  and  the  combination  is  called  a  pool. 
This  form  of  organization  has  been  most  commonly 
emplo^'ed  among  railroad  companies,  and  the  ef- 
forts tp  suppress  it  have  given  rise  to  much  litiga- 
tion. j(lt  was  also  one  of  the  chief  factors  which, 
led  to  the  establishment  by  Congress  of  the  Inter- 
state Commerce  Commission  for  the  purpose  of 
preventing  combinations  and  other  abuses  among 
the  railroads.  It  is  a  form  of  this  class  of  agree- 
ments which  was  shown  by  the  testimony  before 
the  Industrial  Commission  to  have  existed  between 
the  members  of  the  anthracite  coal  combination 
under  which  the  exact  percentage  of  the  total  ton- 
nage which  each  road  was  to  carry  for  the  year 
was  determined  in  advance,  and  by  which  the  sell- 


Trusts  and  Monopolies*.  39 

ing  price  of  coal  was  fixed  at  regular  meetings  of 
the  association. 

A  departure  was  now  taken  from  the  idea  which  V 
had  been  adhered  to  in  all  forms  of  combinations  / 
heretofore  attempted,  of  preserving  the  nominal  *' 
independence  of  the  respective  establishments,  and 
of  securing  to  the  individual  proprietors  a  large 
'degree  of  freedom  in  the  management  and  control 
of  their  properties.    It  began  to  be  recognized  that 
much  of  the  efficiency  of  combination  must  nee-  ■ 
essarily  be  lost  through  divided  management,  and 
that  many  of  the  economies  which  it  sought  to  ef- 
fect in  production  would  be  impossible  under  any 
system  which  seeks  to  continue  the  entire  number 
of  plants  in  operation.    It  was,  therefore,  proposed  |C 
to  place  the  control  of  the  several  properties  in  the 
hands  of  a  few  persons  to  be  managed  for  the  bene- 
fit of  all.    For  this  purpose  a^board  of  trustees  was 
selected  and  the  establishments  were  turned  over  to 
it,  to  be  Mid  .and  operated  f or_the_  use_flLlhe -real, 
-owners.     This  was  precisely  the  same  method  of  ;C 
control  which  the  law  had  for  centuries  recognized 
and  approved  for  the  management  of  the  business, 
property,  or  estates  of  minors  or  others  who  were 
for  any  reason  considered  incapable  of  conducting 
their  own  affairs,  differing  from  it  only  in  the 
manner  of  the  creation  of  the  trust,  which  was  in 
this  instance  by  the  acts  of  the  beneficiaries  them- 
selves, instead  of  through  the  operation  of  law  or 
the  acts  of  third  parties,  as  was  generally  the  case.    / 
The  trustees  gave  receipts  to  the  several  proprietors^'^^K 
for  the  property  turned  over  to  them  which  were  \ 
called  trust  certificates,  and  the  earnings  of  the    \ 
trusts  were  distributed  among  the  holders  of  these    i 


40  Combinations, 

certificates  in  proportion  to  the  value  of  the  prop- 
erty represented  by  each.  Thus  the  integrity  of 
each  of  the  constituent  firms  was  preserved,  al- 
though it  was  deprived  of  the  active  management 
of  its  business. 

^  While  there  has  been  an  endeavor  to  conceal  by 
secrecy  the  existence  of  some  trust,  yet  as  a  busi- 
ness organization,  it  was  conceived  for  the  pur- 
ose  of  assuming  an  independent  and  permanent 
tand  among  the  industrial  institutions  of  the 
country,  and  as  such  it  has  borne  the  brunt  of  a 
large  share  of  the  litigation  which  has  been  waged 
against  industrial  combinations  during  the  last 
twenty  years,  and  has  made  its  name  the  commonly 
accepted  expression  for  industrial  combinations  of 
every  kind  whether  they  partake  of  the  trust  form 
of  organization  or  not. 

I  The  first  and  most  important  instance  of  this 
Itform  of  combination  is  that  of  the  Standard  Oil 
iTrust,  organized  in  January,  1882.  It  was  a  com- 
bination of  a  number  of  the  principal  oil  refineries 
of  the  country,  and  the  trust  was  formed  for  the 
purpose  of  securing  a  more  permanent  organiza- 
tion than  that  under  which  the  same  properties 
had  been  working  together  for  ten  or  twelve  years 
preceding  that  time.  It  continued  to  fight  the 
battles  of  the  combinations  versus  the  people,  and 
was  the  object  of  almost  incessant  litigation  and  the 
subject  of  numerous  official  investigations,  until 
the  year  1899  when  it  was  reorganized  into  the 
Standard  Oil  Company  of  New  Jersey.  The  Sugar 
Trust,  organized  1887,  and  the  Distillers'  and  Cat- 
tle Feeders*  Trust  organized  in  the  same  year,  are 
the  other  two  most  familiar  examples  of  industrial 


Trusts  and  Monopolies.  41 

trusts,  and  they  have  both  since  adopted  the  cor- 
porate form  of  organization.  The  operation  of 
these  trusts  excited  the  fears  and  jealousies  of  the 
people,  who  vigorously  assailed  them  in  all  parts 
of  the  country  and  the  efforts  to  suppress  them  gave 
rise  to  the  multitude  of  anti-trust  statutes  which 
have  been  adopted  in  nearly  every  State  in  the 
Union  and  by  the  National  Government. 

The  vulnerable  point  in  the  trust  form  combina-  X 
tion  was  that  it  preserved  the  identity  of  the  unit-  f 
ing  concerns,  and  merely  combined  them  in  a  some- 
what different  manner  to  that  effected  by  the  vari- 
ous forms  of  agreement  which  had  preceded  it.  It 
is  this  act  of  persons  conspiring  together,  or  com- 
bining for  the  purpose  of  regulating  or  controlling 
trade,  which  the  law  so  strongly  abhors,  and  the 
restrictions  and  limitations  designed  to  prevent 
such  concerted  action  soon  became  so  numerous  as 
to  cause  practical  abandonment  of  the  trust  form 
of  combination. 

All  halfway  measures  were  now  thrown  aside, 
the  pride  which  attaches  to  the  preservation  of 
family  name  in  connection  with  long  established 
business  w^as  cast  to  the  winds,  the  names  of  scores 
of  firms,  the  reputation  of  which  generations  had 
labored  to  establish  and  maintain,  were  wiped  out 
of  existence  and  all  became  completely  merged  in  a  ^ 
few  great  corporations.     The  constituent  elements  ; 
no  longer  preserved  their  distinctive  identity,  and  • 
the  consolidation  was  complete.    The  very  same  in- 
terests were,  it  is  true,  again  united  under  this 
new  form  of  combination,  but  they  no  longer  repre- 
sented so  many  individual  units  of  organization, 
each  capable  of  a  certain  amount  of  independent 


I 


42  Combinations, 

action  and  responsible  to  the  people  for  their  acts 
of  association.  They  now  began  to  throw  aside 
every  appearance  of  individual  power  and  sought  to 
organize  corporations  for  the  purpose  of  carrying 
on  their  business  just  as  the  most  modest  set  of  in- 
corporators might  do. 

The  new  form  of  industrial  combination  which 
now  began  to  supersede  the  trust  was  simply  that 
of  the  private  business  corporation.  Some  sj>ecial 
powers  and  privileges  were  accorded  to  it  by  the 
laws  of  a  few  states,  but  the  general  course  of  pro- 
cedure and  plan  of  organization  was  precisely 
the  same  as  that  pursued  in  the  creation  of  the 
simplest  business  corporation.  Tlie  properties'  of 
the  older  establishments  were  bought  in  by  these 
corporations,  some  being  paid  for  with  stock  in 
the  new  concerns,  while  others  were  paid  for  in 
cash.  The  new  companies  proceeded  to  conduct 
their  business  with  all  the  freedom  and  confidence 
of  institutions  organized  for  purely  legitimate  pur- 
poses, with  no  apparent  appreciation  of  the  fact 
that  they  were  pursuing  the  very  same  ends  for 
which  their  predecessors  had  been  condemned  by 
law  and  declared  to  be  illegal.  These  had  been 
regularly  created  in  the  manner  prescribed  by  law 
for  tlie  organization  of  business  corporations,  and  as 
it  made  no  difference  in  principle  whether  the  pro- 
moters had  formerly  been  engaged  in  the  same  busi- 
ness or  not,  or  whether  the  properties  acquired  were 
entirely  new  or  had  hitherto  belonged  to  the  trusts, 
there  appeared  to  be  but  little  grounds  for  attack- 
ing these  new  combinations. 

No  means  had  been  devised  for  discriminating 
between  the  good  and  the  bad  use  of  corporate 


Trusts  and  Monopolies.  43 

powers,  or  of  determining  to  what  extent  tliey 
might  be  employed  or  by  whom  they  may  be  exer- 
cised. The  people  were  thus  caught  unprepared 
to  cope  with  this  new  phase  of  combination,  and 
while  some  of  the  courts  were  disposed  to  go  be- 
hind the  garb  of  regularity,  and  to  make  the  motive 
the  test  of  legality,  the  temporary  lull  in  the  legal 
warfare  waged  upon  them  was  sufficient  to  cause 
a  most  wonderful  increase  in  the  number  of  these 
monopolistic  corporations,  and  to  give  to  combina- 
tion a  prestige  and  power  which  it  had  never  be- 
fore attained  in  the  history  of  the  industrial  world. 

The  capitalization  of  these  corporations  has  fre-  I 
quently  been  very  great,  the  more  important  of  f 
them  ranging  from  ten  million  to  fifty  million,  a 
hundred  million,  and  to  one  hundred  fifty  million 
dollars  and  upwards,  and  the  extent  of  their  influ- 
ence among  the  industries  of  the  country  can  in. 
some  measure  be  imagined  from  the  amount  of  capi- 
tal which  they  have  had  at  their  command.  Among 
the  more  conspicuous  examples  of  this  class  may 
be  mentioned  the  three  trusts  to  which  we  have  al- 
ready referred,  the  Standard  Oil  Trust,  the  Sugar  \ 
Trust,  and  the  Distillers'  and  Cattle  Feeders'  Trust,  ^ 
all  of  which  are  now  important  corporations  though 
they  do  not  occupy  as  prominent  positions  in  this 
class  as  they  did  among  trusts.     A  table  giving 
the  names  of  one  hundred  and  eighty-five  indus- 
trial combinations,  all  of  which  belong  to  this  class, 
is  elsewhere  presented  in  this  work. 

These  corporations  have  now  come  to  be  pretty 
generally  recognized  as  a  part  of  our  industrial 
system  and  have  established  themselves  with  a  rea- 
sonable degree  of  security  in  the  position  which 


V 


44  Combinations, 

they  now  hold.  Their  efforts,  however,  to  extend 
their  power  still  further,  awl  to  include  within  a 
single  management  nearly  every  conceivable  line  of 
industry,  have  met  with  persistent  opposition  in 
come  quarters  especially  in  connection  with  their 
attempts  to  control  the  railway  systems,  and  this 
has  led  to  the  development  of  still  another  form  of 
combination. 

This  new  organization  of  capital,  which  seems 
^destined  to  control  so  large  a  share  of  the  indus- 
trial interests  of  the  country,  is  what  is  com- 
monly known  as  a  security  holding  corporation.  It 
is  organized  in  precisely  the  same  way  as  any  other 
business  corporation,  and  differs  from  it  only  in 
this,  that  instead  of  directly  conducting  a  regular 
business  in  the  usual  way,  it  merely  proposes  to  hold 
the  stocks  of  other  corporations.  Thus  it  may  hold 
the  controlling  percentage  of  the  stocks  of  many 
companies,  which  will  entitle  it  to  vote,  and  there- 
by elect  its  own  officers  and  directors  for  each  of 
these  companies  who  will  m^inage  the  business  in 
the  interest  of  the  controlling  corporation.  These 
several  establishments,  which  remain  nominally 
independent,  thus  become  merely  the  servants  of 
the  great  central  organization,  while  the  new  cor- 
poration which  conducts  no  active  operations  of 
its  own,  and  is  apparently  unimportant  in  the 
l)usiness  world,  is  in  reality  the  most  successful 
means  which  has  yet  been  devised  for  bringing 
together  the  varied  interests  of  our  industrial  sys- 
jtem. 

The  number  of  these  organizations  has  been 
much  less  than  those  of  the  class  last  mentioned, 
but  their  capitalization  has  usually  been  very  large. 


Trusts  and  Monopolies.  45 

The  most  important  among  them  are  the  United 
States  Steel  Corporation,  capitalized  at  one  bil- 
iTofi,  four  hundred  and  three  million  dollars,  which 
in  a  large  measure  controls  the  iron  and  steel  busi- 
ness of  the  United  States,  and  the  ISorthwestern 
Securities  Company,  with  a  capital  oflouf  hun- 
dred million  dollars,  which  controls  a  number  of 
the  largest  railroad  systems  of  the  country.  The 
attitude  of  these  combinations  is  that  of  a  stock- 
holder in  many  corporations  which  seeks  to  manip- 
ulate them  so  as  to  promote  its  own  private  interest, 
^nd  while  they  are  just  as  truly  the  owners  of  the 
various  properties  which  they  control  as  though 
they  directly  supervised  the  operation  of  them,  and. 
just  as  guilty  of  the  charge  of  combining  to  regu- 
late trade  as  the  trust  and  other  forms  of  com- 
bination which  have  preceded  them,  yet  they  ap- 
pear to  have  evaded  the  provisions  of  the  laws 
designed  to  prevent  consolidation,  and  have  thuL 
far  successfully  withstood  all  attempts  to  disrupt 
them.  They  have  already  resulted  in  the  great- 
est aggregation  of  private  capital  that  the  world 
has  ever  witnessed,  and  they  mark  the  highest 
degree  of  perfection  which  has  yet  been  attained 
in  the  development  of  industrial  organization. 


46 


Combinations, 


CHAPTER  V. 


POWERS    AND    EFFECTS    OF    MOXOPOLIES. 

\        Monopoly  may  be  defined  to  be  the  unified  con- 
trol of  the  production,  manufacture,  sale,  distribu- 

Tii  iti  otpict 


/V 


^' 


tion,  or  use  of  a  given  commodity. 
X  '^opplioation  the  term  mcans^  the  aboolutQ  oontfol ; 
(      but  as  it  is  most  commonly  used  in  relation  to 
\     practical  economics,  it  means  the  command  of  so 
y     large  a  percentage  of  the  commodity  as  will  enable 
N     it  to  exercise  virtual  control  over  the  entire  mar- 
ket, and  concerns  which  have  attained  to  this  de- 
gree of  power,  and  which  have  developed  strong 
•    monopolistic  tendencies,  are  usually  spoken  of  as 
-  monopolies.    It  is,  therefore,  in  this  general  sense 
that  the  term  monopoly  is  used  in  this  work,  ex- 
cept where  an  absolute  monopoly  is  expressly  re- 
ferred to. 
^  Monopolies,  more  or  less  complete,  have  existed 
/at  various  times  and  places  throughout  the  his- 
\iory  of  civilization^  and   England   in  particular 
was  for  a  long  time  ewieiy  oppressed  by  them. 
The  Crown,  seeing  in  monopolies  a  fruitful  source 
of  revenue,  both  for  itself  and  its  favorites^  gave 
them  out  with  a  lavish  hand,  until  nearly  every 
article  of  daily  consumption,  including  the  merest 
necessities  of  life,  was  controlled  by  private  mon- 


Trusts  and  Monopolies.  47 

opolists.  Great  abuse  was  made  of  the  powers  thus 
grasted  to  individuals,  and  the  people  were  driven 
to  such  desperation  in  their  resistance  to  the  un- 
just oppression,  that  the  Crown,  in  order  to  save 
its  prerogative  from  being  entirely  swept  away 
by  a  jpopular  revolt  of  the  common  people,  began 
^to  recall  the  most  obnoxious  of  these  grants  as  an 
act  of  gracious  clemency  to  its  subjects,  and  the 
others  were  later  modified  or  removed  entirely. 

The  people  have  always  regarded  monopoly  as 
being  one  of  the  greatest  enemies  of  their  liber- 
ties^ and-a3-^:fiJmy.e_i).efoxe  -rem-arked,<fHe  com- 
mon law  has  for  centuries  looked  Avith  disfavor 
upon  all  agreements  made  in  restraint  of  trade, 
and  has  done  all  in  its  power  to  prevent  the  growth 
of  monopolieSji  and  to  limit  by  strict  construc- 
tion the  effeetB  &ven  of  those  whielr  have  existed 
by  virtue  of -epecial  grants  or  royal  favor.  In 
consequence  of  this  deep-rooted  public  opinion  and 
popular  antagonism  to  monopolies,  they  have  been 
almost  unknown  in  this  country  until  within  the 
last  few  years,  and  their  power  and  effects  for  good 
or  for  evil  have  not  yet  been  clearly  demonstrated 
to  the  satisfaction  of  our  people.  The  operations 
of  those  concerns  which  have  recently  attained  to 
the  position  of  pradieal  monopolies,  have  been  so 
far  held  in  check  by  competition,  have  been  so  in- 
volved in  their  relations  with  common  carriers 
and  other  concerns,  and  have  so  recently  begun  to 
engage  the  serious  attention  of  the  public,  that  the 
ultimate  effects  of  their  successful  establishment 
and  development  are  still  matters  of  mere  specula- 
tion in  the  minds  of  our  shrewdest  business  men. 
and  statesmen. 


~> 


Af  <l 


^  r  r  -»  li 


r- 


\ 


48  Combinations, 

1  The  powers  of  monopoly  are  very  great  and 
I  numerous,  both  for  good  and  for  evil. 
*  A  corporation  or  combination  having  monopoly, 
or  the  practical  control  of  a  given  commodity,  may 
/-^  in  the  first  place  regulate  its  production  and  dis- 
tribution. It  requires  no  discussion  to  show  that 
^uch  a  monopoly  may  elect  either  to  operate  its 
plants  to  their  full  capacity  or  to  close  them  down 
at  will,  and  thus  to  regulate  the  quantity  of  the 
product  which  shall  be  available  for  the  market, 
and  it  is  equally  clear  that  having  it  in  its  power 
to  control  the  supply,  it  will  be  certain  to  exercise 
that  power  whenever  it  finds  it  to  its  interest  to 
do  so.  It  is  well  understood  that  the  supply  is 
one  of  the  chief  factors  in  the  regulation  of  the 
price  of  any  commodity,  and  since  high  prices 
usually  mean  increased  profits  to  monopolists,  the 
conclusion  seems  unavoidable  that  they  will  make 
free  use  of  their  power  to  control  production  if 
allowed  to  do  so.  That  they  have  exercised  this 
power  would  seem  to  be  amply  attested  by  the 
agreement  entered  into  between  the  members  of 
the  Whiskey  Trust  to  limit  the  production  of  whis- 
key during  a  given  time,  and  between  the  members 
of  the  Standard  Oil  Trust  to  limit  the  production 
of  oil,  both  of  which  are  frequently  cited  as  in- 
stances of  the  restriction  of  production  by  monop- 
olies. '  But  «-ffiore  leeen^- example  of  the  exercise 
of  this  power,  and  one  thaf^te^  perhaps  feeen  more 
directly  felt  by  the  people  at  large  and,  with  which 
they  are  therefore  more  familiar,  ii^the  restrictioil 
of  the  production  of  coal  by  the  Anthracite  Coal 
Combination.  There  ha«  long  been  a  well  founded 
conviction  in  the  minds  of  the  people  that  the  sell- 


w 


Trusts  and  Monopolies.  49 

ing  price  of  coal  hai  been  arbitrarily  fixed  by  this 
combination  regardless  of  the  cost  of  production; 
but  perhaps  a  more  clearly  defined  understanding 
of  the  situation,  and  at  the  same  time  a  more  au- 
thoritative statement  of  the  conditions  as  they 
really  exist§imay  be  found  in  the  testimony  given 
before  the  tlnited  States  Industrial  Commission :  A 
commission  established  by  Congress  in  1898  to  in- 
quire into,  and  to  report  upon,  industrial  combina- 
tions and  their  effects  upon  capital,  agriculture 
and  labor. 

Mr.  John  Mitchell,  President  of  the  United 
Mine  Workers  of  America,  testifying  before  the  In- 
dustrial Commission,  July,  1901,  declareij  "The 
anthracite  coal  railroads  and  mines  are  being  rap- 
idly concentrated  in  the  hands  of  a  few  companies. 
Ninety  per  cent,  of  the  coal  is  already  owned  by 
seven  railroads,  and  this  is  fully  fifteen  per  cent. 
more  than  they  owned  before  the  strike  of  1900. 
Many  of  the  largest  independent  companies  have 
recently  sold  out  to  the  railroads  and  the  witness 
believes  that  soon  the  railroads,  financed  by  the 
Morgan  interests,  will  own  absolutely  all  of  the 
anthracite  coal.'' 

Mr.  Benjamin  James,  testifying  in  April,  1899, 
says:  "The  priees.  o£ anthracite  coal  are  now  being 
regulated,  and^the'^amount  of  the  output  for  each 
year  and  for  each  mine  is  limited,  by  the  Anthra- 
cite Goal  Operators'  Association." 

It  is  equally  apparent  that  a  combination  or 
monopoly  which  has  the  power  to  control  the  quan- 
tity of  a  given  commodity  which  shall  be  produced 
for  the  market,  may  also,  in  a  large  measure  at 
least,  regulate  the  quality  of  that  cacamQdityj, 


50  Combinations, 

This  was  early  recognized  as  being  one  of  the 
evils  which  would  result  from  the  establishment  of 
a  monopoly,  and  the  experience  of  the  people 
during  the  reign  of  monc^olies  which  held  sway 
for  a  considerable  time  during  the  reign  of  Queen 
Elizabeth  of  England,  nnd  whioh  ii  inry  TiTidly 
and  forcibly  dcooribod  jm  Jili'i  Hnwif  ^^  ^'TTJBMpy  nl 
Bu^^auct^"  would  seem  to  have  established  the  grav- 
ity of  this  evil  beyond  a  donht,  ^for-we'fiiid  i^-joid 

dowa.Mi  the  ca?»<»  of  ]>l^rr-  AlleiTi,  repotted 

h^-Lord  Coke,  which  v.,;^  .  4  injjie  Ei^^sh 

counts  in  the  !;i>t  v.  ;ir  of  tlir  rei^^ofQueen  Eliza- 
beth, jn<^  ill!, .  I  iinMi.J  \,  ir<  ncfo,  as  being  one 
of  the  t  ol3\    Tll€Bt~t\ils 

ar^h^iiLiuinviuixu,  iH-nri-t,  ;is  follows  I  "Fiist, 
thatlhe  price  of  the  same  commodity  will  be  raised, 
for  he  who  has  the  sole  selling  of  any  commodity 
may  well  make  the  price  as  he  pleases.     Second, 
the  incident  to  a  monopoly  is  that  after  the  mo* 
nopoly  is  granted,  the  commodity  is  not  so  good 
j_     and  merchantable  as  it  was  before;  for  the  pat- 
"^     entee,  having  the  sole  trade,  regards  only  his  pri- 
vate benefit,  and  not  the  common  wealth.    Third,  v. 
<     it  tends  to  the  impoverishment  of  di^^^^rs-firtrficeTS  vi  t»"^  ^ 
y    and  others  who  before,  by  the  labor  of  their  hands 
in  their  art  or  trade,  had  maintained  themselves 
and  their  families,  who  will  now  of  necessity  be 
constrained  to  live  in  idleness  a-nd  lyffgntjr.^^ 

It  is  not  so  easy  to  point  to  well-established  in- 
stances of  the  abuse  of  the  power  of  monopolies  to 
jegulate  the  quality  of  their  products  as  in  the  con- 
trol of  their  quantity,  for  the  production  of  infe- 
rior goods  always  partakes  of  the  nature  of  a  fraud 
upon  the  public  and  is  therefore  more  difficult  to 


Trusts  and  Monopolies.  51 

prove  beyond  dispute;  but  in  the  case  of  public 
service  monopolies,  such  as  railways,  telegraph, 
telephone,  gas  and  electric  light  plants,  street  rail- 
ways, water  works,  etc.,  it  is  a  matter  of  general 
knowledge  that  the  service  rendered  in  localities  in 
which  they  have  an  absolute  monopoly  is  often  very 
inferior  to  that  which  is  provided  at  points  where 
competition  is  active. 

It  is  undoubtedly  true  that  the  same  care  is  not 
€0  likely  to  be  taken  to  preserve  the  excellence  of 
the  goods  manufactured  in  cases  in  which  a  com- 
plete monopoly  has  been  established,  and  that  the 
same  stimulus  to  improve  the  quality  of  their 
products  which  impels  competitors  to  adopt  the 
latest  and  most  improved  methods  and  appliances, 
would  in  a  large  measure  be  lost.  On  the  other 
hand,  it  is  equally  true  that  the  necessity  for  striv- 
ing to  undersell  competitors,  which  is  the  chief 
incentive  to  adulteration  and  the  production  of 
inferior  products,  is  removed ;  and,  having  control 
of  the  market,  it  is  in  a  position  to  command  its 
ovm.  prices,  and  should,  therefore,  be  more  willing 
and  able  to  produce  a  good  grade  of  goods.  We 
already  have  state  and  national  statutes  regulating 
and  prohibiting  the  adulteration  of  food  and  other 
products,  and  it  would  seem  that,  with  perhaps 
some  extension  of  their  scope,  a  thorough  appli- 
cation of  the  provisions  of  these  statutes  might 
do  much  to  minimize  the  evil  effects  of  the  exercise 
of  this  power  by  combinations. 

Possessing  the  power  to  regulate  production  and 
to  restrict  or  expand  the  supply  of  a  commodity, 
monopoly  can,  therefore,  control  prices;  for  price, 
meaning  as  it  does,  the  amount  which  the  public 


52  Combinations, 

is  willing  to  pay  for  a  given  article  at  a  given 
time,  is  always  governed  by  the  available  supply 
of  the  article  in  the  market,  and  the  number  of 
persons  who  desire  to  purchase  it;  and  whoever, 
therefore,  can  control  either  the  supply  or  the  de- 
mand, can  fix  the  price. 

This  power,  as  we  have  just  seen  in  the  case  re- 
^--  ported  by  Lord  Coke,  was  also  early  recognized 
'       ^s  being  one  of  the  ,>ehicf  "]5o^'5r5"-fet^il  which, 
pertained   to  mofrepoly,^  and   the   three   hundred 
\         years  which  have  since  elapsed^have  merely  served 
to  confirm  the  truth  of  the  positiqii  then  taken 
(        by  the  English  courts,  and  to  multiply  ^examples 
\     of  the  exercise  of  the  power  of  monopolies.  "^"  v^^^^^ 
Other  monopolies  which  do  not  enjoy  the  excep-^ 
iional  advantages  possessed  by  the  coal  combina- 
tion,   owning    directly    the    means    of    transpor- 
tation    as    well     as     a     controlling     percentage 
of     the     coal     to     be     transported,     have     also 
resorted    to    the    expedient    of    reducing    prices 
in    order    to    cripple    or    destroy    competition. 
T'hese  in  many  instances  have  formed  alliances 
with    the    railway    companies    serving    substan- 
tially the   same  purposes   as  owning   them   out- 
Tight,  while  others  rely  upon  their  great  financial 
resources  to  enable  them  to  outlast  and  to  ruin 
their  competitors.    A  most  remarkable  instance  of 
the  extent  to  which  these  alliances  between  great 
-corporations  and  the  railroads  have  been  carried, 
yy^HAi   presented  by  the  agreement  entered  into  be- 
tween the  Standard  Oil  people  and  the  railroads, 
which  was  brought  out  in  a  congressional  investi- 
gation in  1872.    By  this  contract  the  railroads  not 
only  undertook  to  charge  the  independent  refiners 


Trusts  and  Monopolies.  53 

double  the  rates  charged  the  Standard  Oil  people 
for  the  transportation  of  their  oil,  but  agreed  to 
pay  over  the  amount  so  collected  in  excess  of  the 
regular  rates  to  the  Standard  Oil  people. 

The  contest  between  the  Standard  Oil  Trust  and 
the  independent  refiners  affords  one  of  the  best 
known  examples  of  the  efforts  of  a  would-be  mo- 
nopoly to  destroy  competition  by  reducing  prices, 
and  it  is  very  nicely  described  by  Mr.  Byron  W. 
Holt  in  an  article  in  the  "American  Monthly  Ee- 
view  of  Eeviews"  for  June,  1899,  as  follows:  "Un- 
able to  obtain  fair  treatment  from  railroads,  the 
independent  refiners  in  1878  and  1879,  with  a  cap« 
ital  of  five  million  dollars,  constructed  the  Tide- 
water Pipe  Line  Company.  Immediately  the  rail- 
Toads  reduced  their  rates  on  oil  from  $1  per  barrel 
to  80  cents,  to  30  cents,  to  10  cents,  and  at  last,  as 
the  general  freight  agent  of  one  of  the  roads 
stated,  to  a  rate  that  would  not  pay  for  wheel 
grease.  The  Tidewater  Pipe  Line  Company  sur- 
vived the  many  attacks  until  1883,  when  it  was 
gobbled  up  by  the  trust."  Another  familiar  in- 
stance of  this  method  of  enforcing  the  dictation 
of  large  concerns  upon  the  smaller  ones  "ite^  found 
in  the  frequent  rate  wars  between  competing  rail- 
way lines. 

I  Having  thus  established  the  ability  of  monopo- 
llies  to  so  reduce  prices  as  to  compel  obedience  to 
•their  dictation  by  those  of  their  competitors  who^ 
are  permitted  to  remain  in  the  business,  it  re-^ 
quires  no  further  discussion  to  show  that,  having 
(secured  control  of  the  market,  it  may  advance 
(prices  sufficiently  high,  at  least,  to  yield  excessive 
profits  to  itself,  and  to  unduly  oppress  the  con- 


54  Combinations, 

sumer.  The  Standard  Oil  Trust  again  affords 
us  an  example  of  the  exercise  of  this  power,  for 
after  maintaining  ruinous  prices  until  it  secured 
control  of  the  market,  it  then  raised  prices  to  such 
an  extent  as  to  yield  profits  ranging  from  twelve 
per  cent,  per  annum  in  1894,  to  forty-eight  per 
cent,  per  annum  in  1901,  as  shown  by  the  table 
of  the  earnings  of  that  company  printed  in  an- 
other chapter.  It  may  be  that  there  is  a  point  be- 
yond which  prices  cannot  be  raised  without  at- 
tracting new  competitors  into  the  business,  but 
the  experience  of  the  Standard  Oil  Trust  proves 
that  millions  of  dollars  of  unearned  profits  may 
be  collected  from  the  people  before  this  remedy 
can  prove  effective  in  checking  the  power  of  the 
monopolist. 

The  theory  has  been  advanced  by  one  of  the  best 
known  economists  of  our  day  that  there  is  always 
a  certain  price  in  every  business  which  may  be 
designated  the  monopoly  price,  at  which  the  great- 
est number  of  persons  are  able  and  willing  to  pur- 
chase, and  at  which  the  fixed  charges  will  be 
smallest  in  proportion  to  the  amount  of  sales,  and 
which,  therefore,  yields  the  largest  possible  net 
profit  to  the  producer;  that  if  prices  are  raised 
above  this  point,  the  sales  will  diminish  more 
rapidly  than  the  profits  w411  be  increased  by  the 
higher  prices  charged;  while  if  prices  be  reduced 
below  that  point,  the  increase  in  the  sales  will  not 
be  sufficient  to  counteract  the  proportionate  in- 
crease in  the  fixed  charges,  and  that  if  combina- 
tions are  left  to  themselves,  they  will  eventually 
fix  prices  at  this  point  of  greatest  return.  Tables 
have  been  prepared  with  much  care  to  illustrate 


Trusts  and  Monopolies.  55 

the  natural  law  of  gravitation  of  prices  to  this 
point  of  equilibrium,  but  it  appears  that  indus- 
trial combinations  had  not  yet  sufficiently  devel- 
oped to  afford  the  writer  practical  examples  of  the 
application  of  his  theory,  and  natural  monopolies 
such  as  street  car  companies,  etc.,  which  had  long 
enjoyed  monopolistic  privileges,  appear  to  be  the 
only  instance  in  which  we  might  reasonably  ex- 
pect to  see  the  principle  exemplified. 

It  may  be  true  that  there  is  such  an  ideal 
price  to  be  found  in  business  if  those  engaged 
could  be  induced  to  seek  for  it,  and  to  be  content 
with  it  when  found,  but  it  is  also  true  that  cor- 
porations as  well  as  individuals  will  ever  be  found 
reluctant  to  reduce  prices  which  have  once  been 
established,  in  the  belief  that  by  sacrificing  present 
profits  they  may  hope  to  secure  larger  returns  in 
the  future;  and  if  the  public  is  to  be  protected 
from  excessive  overcharges  by  monopolies,  which 
according  to  many  authorities  amounts  to  66  2-3 
per  cent,  in  the  case  of  street  car  fare,  some  more 
powerful  influence  than  the  mere  automatic  work- 
ing of  an  economic  principle  must  be  invoked 
to  arrest  the  hand  of  greed. 

The  power  of  monopolies  to  control  prices  hav- 
ing now,  we  believe,  been  made  sufficiently  ap- 
parent, let  us  inquire  what  use  are  they  likely  to 
make  of  it.  The  Standard  Oil  Trust,  the  Sugar 
Trust,  the  Anthracite  Coal  Combination,  and  the 
Whiskey  Trust,  are  about  ,the  only  important 
members  of  their  class  that  have  been  in  operation 
long  enough  to  afford  much  of  a  foundation  for 
judgment  as  to  what  the  effect  of  combination 
on  prices  really  has  been.    They,  being  the  pioneers 


\ 


^6  Combinations, 

in  the  combination  movement,  have  been  so 
fiercely  assailed  by  the  courts,  by  the  press,  by 
public  sentipent,  by  politicians,  and  by  competi- 
tors; bfc^!*fexisted  under  so  many  varying  condi- 
i  ^^  tions,  and  been  obliged  to  change  their  form  of 
organization  so  many  times,  that  it  is  doubtful 
, .:  whether  their  effect  upon  prices  4uriug  Um  jMwt 

f*  .  ,/(,^ -fifteen  or -twrn  IV  vcarft  Trill  afford  any  trueclue 
to  what  their  (Mi-Ht  will  be  dnriiii!^  the  next-fffteen 
years  under  the  new  and  M.iiiinc'-Ir  ainidst  unas- 
sailable formo|^,jW>gatfization,  and  that-vB-ith  a 
h2t2X.^lli«rTnafield  which  appears  to  be  nearly 

[ cleared    of    all    effective    opposition.^  Numerous 

tables  showing  the  prices  of  oil,  sugar,  and  ^^'his- -K p^  ^ » 
key,  at  frequent  intervals  during  Him  luui  fiftiMii  j^    '^ 
'01'  twenty  ytawi^  have  been  prepared  and  published/^^A^ 
but  they  fail  to  afford  any  convincing  evidence  of  ^u 
the  effect  of  combination  on  prices.     The  general 
conclusioJ&deri^ed  from  an  examination  of  these 
tables  ipprnn  li  nn  that  prices  have  been  a  little 
higher   during  the  periods   in  which   the  trusts 
were  more  nearly  in  complete  control  of  the  mar-  ^    v^ 
ket   than  they   were   at   other  times.      Wo  figd,  *^  )f^ 
however,  nothing  in  them  that  would  seem  to  war-        ^ 
rant  iig   iik  drawing  any   definite   conclusions^  -v 

'"■  "-^"TThich  woifld  be  of  any  mntcrinl  to -ij^aa, 

pursuing  our  investigation  of  the  c-,.^.... 
JJ^  Wr  believe  that  the  only  true  key  to  the  correct 
understanding  of  the  purpose  and  ultimate  ef- 
fects of  combinations  and  monopolies  is  to  be 
found  in  the  study  of  the  nature  of  the  organiza- 
tions, and  of  the  character  of  the  individuals  who 
compose  them.  The  men  who  organize  and  con- 
trol these  large  monopolistic  corporations  are  men 


Trusts  and  Monopolies.  57 

•who  have  devoted  their  lives  to  the  acquisition  of 
wealth  and  whose  experience  and  training  have  all 
been  calculated  to  fit  them  to  drive  the  shrewdest 
bargains,  and  to  secure  the  largest  possible  profit 
upon  every  dollar  invested.  Their  sole  purpose  in 
organizing  these  corporations  is  to  secure  greater 
profits  than  they  can  hope  to  secure  through  their 
individual  efforts. 

Every  individual,  no  matter  how  engrossed  he 
may  be  in  the  strife  for  gain,  is  more  or  less  in- 
fluenced by  feelings  of  social  and  moral  obligation 
and  restraint,  and  is  liable  at  times  to  be  swerved 
from  the  strict  path  of  profit  seeking  and  led  to 
yield  a  point  to  considerations  of  charity  or  hu- 
manity, but  not  so  with  a  corporation.  Its  officers 
feel  no  moral  responsibility  for  the  acts  which  they 
perform  in  the  name  of  the  corporation;  they  are 
limited  in  powers  and  responsibilities,  and  distress 
may  plead  in  vain  for  mercy  to  the  average  cor- 
poration official,  only  to  be  informed  that  the  rules 
of  the  corporation  will  not  permit  him  to  grant  the 
relief  sought;  and  the  larger  and  more  powerful 
a  corporation  grows,  the  less  sentimental  it  be- 
comes. Profit  is  its  purpose,  the  statute  book  its 
conscience,  and  it  knows  no  higher  law  or  motive. 

It  is  frequently  claimed  by  the  friends  of  com- 
bination that  its  purpose  is  not  to  raise  prices  but 
merely  to  steady  them  and  to  do  away  with  ruinous 
"competition.  But  if,  as  seems  to  be  the  case,  by 
steadying  prices  they  mean  to  preserve  any  given 
set  of  rates  and  to  prevent  the  gradual  reduction 
an  prices  which  should  naturally  follow  the  con- 
tinual improvements  which  are  being  made  in 
ithe  methods  of  production  and  manufacture,  it 


58  Combinations, 

is  virtually  the  same  as  if  they  had  openly  avowed 
their  purpose  of  raising  prices. 

Such  being  the  purpose  of  its  creation,  having 
such  skillful  talent  to  direct  it,  and  enjoying  such 
freedom  from  moral  or  human  restraint,  what  use 
can  we  reasonably  expect  a  monopolistic  corpora- 
tion to  make  of  its  powers  except  to  secure  the 
largest  possible  profits  for  itself?  It  is  dictated 
by  the  natural  instincts  of  human  nature;  it 
was  practiced  with  relentless  severity  centuries  ago 
when  monopolies  controlled  the  industries  of  Eng- 
land; thjai^anwal  course  of  prices  of  all  articles 
i,,  ly^ju^'  lifflfrnliPFM  largely  controlled  by  trusts  dur- 
^ JT  ingl^tat  years,  coupled  with  the  stubborn  resist- 
(^•^  ance  with  which  trusts  and  monopolies  ^Sm£  met 

every  effort  to  linut  their  power,  sufficiently  indi- 


fi 


cates  that  such  ]iao*iOQ&  the  purpose  of  the  trusts 
.   ?  r''*of  recent  wtws ;   the  prevailing  high  prices  of  arti- 

cles  controlled  by  combinatians  at  the-ptefieat-time/  ^  / 
i  ^»  aMkifift  it  clear  that  ther^T^i*  no  disposition  on  the  ,f^J 
•i-y^        part  of  the  monopolies «©f.4«-4«y  to  give  the  public  ' 
the  benefit  of  the  increased  facilities  for  production 
and  distribution,  and  there  appeariJ  to  be  nothing 
\     to  indicate  that  the  same  purpose  jKi^jL  not  continue 
\  to  be  the  prevailing  policy  of   the  monopolistic^ 


^fc^' 


>^..  K    tjorporations  of  the  future. 


e  here  present  a  section  of  a  number  of  tables 
prepared  by  Professor  Jenks  for  the  Department 
of  Labor  of  theJJnited  States,  and  published  in 
the  Bulletin  Departm^i^t  of  Labor  No.  29,  July, 
ISOO,  showing  the  montll!!^'p^jces  of  a  number  of 
the  leading  articles  controlled  'by  combination  for 
the  years  1897,  1898  and  1899.  We  have  merely 
reproduced  the  last  three  years  of  the  tables  be- 


Trusts  and  Monopolies.  59 

lieving  that  this  is  a  sufficient  length  of  time  to 
afford  a  general  idea  of  the  range  of  prices.  It 
will  also  be  seen,  from  the  notes  accompanying  the 
tables,  that  many  of  the  combinations  referred  to 
were  organized  some  years  prior  to  the  period 
covered  by  the  tables,  while  others  were  formed 
during  that  time,  thus  enabling  the  reader  to  note 
the  effect  upon  prices  of  the  transition  from  comi- 
petition  to  combination,  and  to  compare  the  fluctu- 
ation in  the  prices  thus  effected  with  that  of  the 
price  of  articles  controlled  by  combinations  which 
had  been  long  established  or  which  had  not  yet 
been  subjected  to  such  control. 

We  are  told  that  the  great  advance  in  the  price 
of  many  of  the  articles  shown  in  these  tables  can- 
not be  wholly  charged  to  the  effect  of  combination, 
and  that  much  of  it  is  due  to  the  increased  cost  of 
raw  materials,  but  we  wish  to  call  attention  to  the 
fact  that,  particularly  in  the  iron  and  steel  indus- 
tries, the  raw  materials  are  largely  controlled  by 
the  same  combinations  that  control  the  finished 
products,  and  that  whether  the  increased  cost  is 
due  to  the  one  or  the  other,  it  all  goes  into  the 
same  treasury,  and  amounts  to  the  same  thing  in 
the  end.  And,  while  some  portion  of  this  enhanced 
price  may  doubtless  be  due  to  a  normal  increase 
in  value  of  all  kinds  of  property,  there  can  be  no 
reasonable  doubt  that  a  large  part  of  the  enormous^ 
increase  in  prices,  which  resulted  immediately  upon  A 
organization  of  the  combinations  controlling  the  J 
production  of  iron  and  steel  and  tfieir  products,  y' 
must  be  directly  due  to  the  power  of  combination ; 
also  that  in  the  absence  of  special  circumstances, 
it  would  seem  that  any  general  increase  in  prices 


6o  Combinations, 

that  might  be  due  to  improved  business  conditions 
would  be  pretty  generally  reflected  all  along  the 
line,  and  that  any  very  considerable  increase  in 
prices  in  excess  of  this  general  average  might  be 
fairly  charged  to  combinations  if  they  have  ac- 
quired control  of  the  product. 


Trusts  and  Monopolies.  6ri 


MONTHLY  PRICES  OF  CORN  MEAL,  OATMEAL,  ETC.;, 

AND  THE  MATERIALS  ENTERING  INTO  THEIR 

MANUFACTURE,   1897  TO  1899. 

(The    combination    manufacturing    a    large    quantity    of 
tliese  products  was  organized  in  June,  1891.) 


Products. 


Corn 
Year  and  month.  meal, 

white, 
per  196 

pounds. 
1837. 

January     $1.95 

February    1.60 

March     1.60 

April     1.60 

May    1.70 

June    1.70 

July    1.70 

August    1.95 

September    2.00 

October   2.00 

November    1.85 

December 1.85 

1898. 

January    1.85 

February    1.85 

March     1.95 

April 1.95 

May    1.95 

June   2.05 

July    2.05 

August    2.15 

September    2.00 

October    2.00 

November     2.00 

December    2.00 

1899. 

January    2.05 

February    2.05 

March    2.15 

April     2.15 

May    2.05 

June   2.15 

July    2.15 

August    2.15 

September    2.10 

October    2.10 

November 2.10 

December    2.10 


Mate- 
rial. 
Corn, 
No.  2, 


Products. 


Corn 

meal,       No.  2,        Oat-     Rolled 
yellow,    cash,  per    meal      oats 
per  196    bushel,    per  200  per  180 

pounds.  pounds,  pounds. 


$1.65 
1.45 
1.40 
1.40 
1.45 
1.45 
1.40 
1.60 
1.85 
1.80 
1.70 
1.70 


1.70 
1.65 
1.75 
1.75 
1.80 
2.00 
1.75 
1.80 
1.70 
1.70 
1.70 
1.95 


2.00 
2.00 
2.10 
2.10 
1.80 
2.10 
2.10 
2.10 
2.10 
2.10 
2.05 
2.05 


$0.2256 
.2250 
.2375 
.2419 
.2425 
.2444 
.2644 
.2937 
.2962 
.2650 
.2669 
.2625 


.2713 
.2894 
.2894 
.3206 
.3469 
.3362 
.3362 
.3175 
.3025 
.3081 
.3306 
.3556 


.3668 
..3525 
.3456 
.3462 
.3344 
.3438 
.3294 
.3175 
.3313 
.3200 
.3200 
.3075 


$4.25 
3.65 
3.40 
3.40 
3.30 
3.20 
3.20 
3.40 
4.40 
3.40 
3.40 
3.40 


3.60 
3.75 
3.90 
4.00 
4.20 
4.10 
3.90 
3.70 
3.70 
3.00 
3.60 
3.70 


3.70 
3.00 
4.15 
3.90 
3.85 
3.80 
3.90 
3.90 
4.00 
4.55 
4.65 
4.30 


$3.50 
3.25 
3.00 
2.90 
2.90 
2.75 
2.75 
3.00 
4.00 
3.00 
3.00 
3.00 


3.25 
3.35 
3.50 
3.60 
3.85 
3.70 
3.50 
3.30 
3.25 
3.20 
3.20 
3.30 


3.30 
3.50 
3.65 
3.45 
3.45 
3.40 
3.40 
3.40 
3.60 
4.15 
4.25 
3.90 


62 


Combinations, 


MONTHLY  PRICES  OF  CORN  MEAL^  OATMEAL,  ETC. 


,Year  and  month. 


Material— 

oats. 

No.  2, 

cash,  per 

bushel. 


1897. 

January   $0.16,3-8 

February 16  1-8 

March    16  1-2 

April    17  1-8 

May    17  2-3 

June   18  1-8 

July    17  1-2 

August 18  1-6 

September 19  4-5 

October    18.3-4 

November 20  7-8 

December    22  2-5 


Product — 

Material- 

pearl 

barley, 

barley. 

No.  3, 

per 

per 

pound. 

bushel. 

$0.01  3-8 

.2940 

.01  3-10 

.2859 

.01  1-4 

.2813 

.01  1-8 

.2925 

.01 1-8 

.2'J87 

.01  1-8 

.2988 

.01  1-7 

.3090 

.01  1-4 

.3245 

.01  2-5 

.3813 

.01  3-8 

.3518 

.01  5-8 

.8919 

.01 1-2 

.3555 

January   . 
February 
March    . . . 

April 

Uay    

June   

July    

August  .  . 
September 
October  . 
November 
December 


.22  3-4 

.01  1-2 

.3238 

.25  1-2 

.01  3-8 

.3387 

25  4-5 

.01  2-5 

.3737 

.28  2-5 

.01  1-2 

.4125 

.29 

.01  5-8 

.4675 

.23  3-4 

.01  3-4 

.,3575 

.23  3-8 

.01  5-8 

.3310 

.21  3-8 

.01  1-2 

.3687 

.21  3-10 

.01  5-8 

.3660 

.23  1-4 

.01  3-4 

.8850 

.20 

.01  7-8 

.4313 

.26  7-8 

.02 

.4520 

1899. 

January   .  .*. 27 

February 27  .3-5 

March    26  1-2 

April     26  4-5 

May    25  7-12 

June 25  1-4 

July    23  3-4 

August     20  3-5 

September 22  1-8 

October    22  3-4 

November 23  1-4 

December 22  3-5 


01  9-10 

.4656 

01  9-10 

.4581 

.01  9-10 

.4485 

013-4 

.4412 

01  3-4 

..3912 

.01  3-4 

.3817 

.01  3-4 

.3910 

01  $-4 

.3713 

.01  5-8 

.4005 

02  1-10 

.4162 

.02  1-4 

.4016 

.02  1-4 

.3890 

Trusts  and  Monopolies.  63 

MONTHLY  PRICES  OF  WHEAT  AND  RYE  FLOUR,  AND 

THE  MATERIALS  ENTERING  INTO  THEIR 

MANUFACTURE,  1897  TO  1899. 

(The    combination    manufacturing  a    large    quantity    of 
these  products  was  organized  in  June,  1891.) 

Products. 

Flour,  Flour,               Flour, 

spring  good  spring     medium  to 

Tear  and  month.               wheat,  pat-  supers         choice  win- 

ent  process,  low  grade,     ter  wheat, 

per  barrel.  per  barrel,     per  barrel. 

1897. 

January    $4.27  $1.70  $4.32 

February    4.1.3  1.57  4.15 

March 4.05  1.48  4.10 

April    3.98  1.47  4.09 

May    4.09  1.47  4.44 

June    3.85  1.44  4.05 

July    3.93  1.44  4.96 

August    4.65  1.74  4.33 

September    5.28  2.00  4.78 

October 4.89  1.96  4.68 

November    4.75  1.78  4.44 

December  4.61  1.75  4.30 

1898. 

January    4.59  1.67  4.33 

February    4.84  1.77  4.45 

March 4.89  1.95  4.40 

April 5.12  2.04  4.49 

May     6.66  2.56  6.15 

June    5.19  2.12  4.90 

July     4.48  1.62  3.96 

August    4.17  1.52  3.36 

September    3.53  1.50  3.11 

October     3.49  1.55  3.14 

November    3.48  1.65  3.15 

December   3.37  1.65  3.20 

1899. 

January     3.46  1.68  3.40 

February    3.55  1.65  3.50 

March    3.47  1.52  3.30 

April 3.45  1.48  3.19 

May    3.52  1.50  3.22 

June    3.60  1.58  3.30 

July    : 3.52  1.57  3.22 

August    3.50  1.52  3.16 

September    3.55  1.53  3.21 

October    3.55  1.62  3.29 

November    3.42  3.42  3.20 

December    3,38  1.52  3.10 


64  Combinations, 

MONTHLY  PRICES  OF  WHEAT  AND  BYE  FLOUB. 


Material — 
wheat.  No.  2, 
Year  and  month.       cash. 

per  bush. 

1807. 

January   $0.77 

February 74  1-2 

March 73  1-2 

Aorll    72 

^lay    72  1-4 

June 70 

July    73  1-4 

August 88 

September 92  1-2 

October    «>0 

November 92  1-4 

December 96 


1898. 

January 99  1-2 

February    1.01  1-2 

March     1.03  1-4 

April    1.12  1-4 

May    1.51 

June 97  1-2 

July    76  4-5 

August 70  1-4 

September 65  1-4 

October     66  1-12 

November 67 

December 66  1-4 


1899. 

January 71  1-4 

February 72  1-12 

March 70  1-4 

April    73  1-4 

M^y     73  9-10 

June 75  1-4 

July    72 

August 71  3-4 

September 72  1-4 

October     71   5-12 

November 68  1-4 

December 66  3-4 


Product — 

Material- 

rye  flour, 

rye,  No.  2, 

good  to 

in  store, 

choice. 

per  bush. 

per  barrel. 

12.65 

$0.3708 

2.31 

1-4 

.3390 

2.22 

1-2 

.3337 

2.22 

1-2 

.3310 

2.30 

.3425 

2.18 

..3.^37 

2.23 

.3627 

2.55 

.4600 

3.30 

.4987 

2.94 

1-2 

.4608 

2.97 

1-2 

.4747 

2.82 

1-2 

.4640 

2.70 

.4525 

2.80 

.4853 

2.75 

.4031 

2.96 

1-2 

.5320 

8.78  3-4 

.6624 

2.96 

1-4 

.4487 

2.60 

.4555 

2.51 

1-4 

.4378 

2.43 

.4543 

2.64 

.4916 

2.78  3-4 

.5131 

2.85 

.5375 

2.97 

1-2 

.5504 

3.00 

.5577 

2.79 

.5387 

2.80 

.5565 

2.88 

.6012 

2.91 

1-2 

.5927 

2.82 

1-2 

.5504 

2.63 

.5343 

2.79 

.5595 

2.91 

.5568 

2.83 

.5247 

2.79 

.5040 

Trusts  and  Monopolies. 


6s 


MONTHLY    PRICES    OF    CRACKERS    AND    THE    MATE- 
RIALS ENTERING  INTO  THEIR  MANU- 
FACTURE, 1897  TO  1899. 

(The  combination  controlling  60  per  cent,  of  these  prod- 
ucts  was   organized   in   February,   -"-^-^ 


Soda 
crackers. 
Tear  and  month.        XXX,  per 
pound. 

1897. 

January    $0.06 

February    05^4 

March     05Mi 

April    OSVa 

May    05^ 

June    OoVi 

July    05  Va 

August 05^ 

September 05^ 

October    05^ 

November    05  ^ 

December    06 

1898. 

January 06^4 

February    06% 

March    06  Va 

April    OeVa 

May     07 

June 07  Vi 

July    O6V2 

August 06% 

September    06% 

October     06^ 

November 06 

December    06 

1899. 

January 06 

February    06 

March 06 

April    06 

May    06 

June    06 

July    06 

August     06 

September    06 

October    06% 

November    06% 

December    06  % 


1898.) 
Products. 

Soda 

Ginger 

crackers, 

snaps. 

standard, 

XXX,  per 

per 

pound. 

pound. 

$0.06 

$0.08 

.05% 
.05% 

.07 

.07 

.05% 
.05% 

.07 

.07 

.05% 

.07 

.05% 

.07 

.05% 

.07 

.05% 

.07 

.05% 
.05% 

.07 

.07 

.06 

.08 

.06% 

.08 

.06% 

.08% 

.06% 

.08% 

.06% 

.08 

.07 

.08 

.07 

.08% 

.06% 

.07% 

.06% 

.07% 

.06% 

.07% 

.06 

.07% 

.06 

.07% 

.06 

.07% 

.06 

.07% 

.06 

.07% 

.06 

.07% 

.06 

.07% 

.06 

.07% 

.06 

.07% 

.06 

.06 

.07% 

,06 

i07% 

.06 

.0(1 

.07% 

.06 

.07% 

66  Combinations, 

MONTHLY  PRICES  OF  CRACKERS. 


Flour, 
spring 
wheat, 
Year  and  month.         patent 
process, 
per  bar- 
rel. 

1897. 

January     $4.27 

February     4.13 

March    4.05 

April    8.98 

May    4.09 

June     3.85 

July    3.93 

August     4.65 

September 5.28 

October    4.8  > 

November    4.75 

December    4.61 

1898. 

January    4.59 

February    4.84 

March    4.89 

April    5.12 

May    6.66 

June     5.19 

July    4.48 

August    4.17 

September 3.53 

October   3.49 

November    3.48 

December    3.37 

1899. 

January     3.46 

February    3.55 

March    3.47 

April    3.45 

May   3.52 

June    3.60 

July    3.52 

August     3.50 

Boptember    3.55 

October    3.55 

November    3.42 

December    3.38 


Materials. 
Flour, 
good 
spring  su- 
pers, low 

grade, 
per  bar- 
rel. 


$1.70 
1.57 

1.48 
1.47 
1.47 
1.44 
1.44 
1.74 
2.00 
1.96 
1.78 
1.75 


1.67 
1.77 
1.95 
2.04 
2.56 
2.12 
1.62 
1.52 
1.50 
1.55 
1.65 
1.65 


1.68 
1.65 
1.52 
1.48 
1.50 
1.58 
1.57 
1.52 
1.53 
1.32 
l.H(» 
1.52 


Flour, 
medium 

to  choice 
winter 
wheat, 
per  bar- 
rel. 


$4.32 
4.15 

4.10 
4.09 
4.44 
4.05 
3.96 
4.33 
4.78 
4.68 
4.44 
4.30 


4.33 
4.45 
4.40 
4.49 
6.15 
4.90 
3.96 
3.36 
3.11 
3.14 
3.15 
3.20 


3.40 
3.50 
3.30 
3.19 
3.22 
3. .30 
3.22 
3.16 
3.21 
3.29 
3.20 
3.10 


Lard, 

steam 

retined, 

per  100 

pounds. 


$3.90 
8.85 
4.13 
4.17 
3.92 
3.60 
4.05 
4.47 
4.61 
4. .37 
4.23 
4.33 


4.72 
5.02 
5.19 
5.28 
6.23 
5.87 
5.46 
5.20 
4.91 
4.89 
4.93 
5.20 


5.5» 
5.54 
5.28 
5.21 
5.09 
4.98 
5.?4 
5.10 
5.21 
5.41 
5.08 
5.26 


Trusts  and  Monopolies, 


67 


MONTHLY  PRICES  OF  ONE  LEADING  BRAND  EACH  OF 
CHEROOTS,    CIGARETTES,    AND    SMOKING   TO- 
BACCO, AND  THE  MATERIALS  ENTERING 
INTO  THE  MANUFACTURE  OF  EACH, 


(The 

combinatio 

n    contr< 

filing   tt 

le   greater  proportion   of 

these  products  was 

organized  in  1890.) 

Cheroots. 

Cigarettes.        Smoking  tobacco. 

???5' 

1? 

u^:^ 

?S 

p  fc  3 

?S 

«  2  0 

X  2  0 

crps 

t<^-o 

crp 

Year 

«^i 

2  ^ 

I? 

is 

S    r 

°^ 

^    ^ 

-®E 

•S    S- 

-°E 

and 

•a  — 

•^ 

-^S- 

2  1 

M'l    1 

•^  1 

n  \ 

"O   1 

month. 

is! 

1\ 

o2  5" 

41 

1897. 

§? 

p 

'  s? 

pS? 

^a 

Jan.... 

.$9.25        $0.1328 

$2.92 

$0.1089 

$0.20 

$0,031.3 

Feb.    . .  . 

.    9.25 

.1384 

2.02 

.1083 

.20 

.0316 

March    . 

.    9.25 

.1317 

2.92 

.1077 

.20 

.0317 

April    .. 
Uky   ... 

.    9.25 

.1211 

3.30 

.1071 

.20 

.0317 

.    9.121^ 

.1206 

2.92 

.1053 

.20 

.0318 

June    . . 

.    9.00 

.1211 

2.92 

.1058 

.20 

.0317 

July    ., 

..  9.00 

.1200 

2.96 

.1057 

.20 

.0317 

Aug.  ... 

.    9.00 

.1177 

2.71 

.1015 

.20 

.0317 

Sept    ... 

,.    9.00 

.1239 

2.42 

.1034 

.20 

.0352 

Oct    .... 

.    9.00 

.1222 

2.42 

.1052 

.20 

.0386 

Nov.    . . , 

..    9.00 

.1228 

2.42 

.1058 

.20 

.0414 

Dec    ... 

.    9.00 

.1272 

2.50 

.1063 

.20 

.0425 

1898. 

Jan    . . . 

.    9.00 

.1.339 

2.70 

.1064 

.20 

.0431 

Feb.    ... 

.    9.00 

.1288 

2.70 

.1063 

.20 

.0438 

March    . 

.    9.00 

.1299 

2.70 

.1063 

.20 

.0448 

April    .  . 
ISJay    .. 

.    9.00 

.1322 

2.70 

.1062 

.20 

.045) 

..   9.00 

.1328 

2.70 

.1061 

.20 

.0466 

June     . . 

.    8.321^ 

.1333 

2.45 

.1061 

.20 

.0470 

July    .. 

..   7.65 

.1305 

2.20 

.1062 

.22 

.0473 

Aug.    . . 

..   7.65 

.1383 

2.20 

.1061 

.22 

.0472 

Sept.    .. 

.    7.65 

.1378 

2.20 

.1055 

.22 

.0508 

Oct    .... 

,  .    7.65 

.1395 

2.20 

.1043 

.22 

.0502 

Nov.    . . . 

,  .    7.65 

.1488 

2.20 

.1040 

.22 

.0498 

Dec.    .. 

..    7.65 

.1538 

2.20 

.1047 

.22 

.0498 

1899. 

Jan.    .., 

. .    7.65 

.1428 

2.20 

.1051 

.22 

.0498 

Feb.    ... 

.  .    7.65 

.1417 

2.20 

.1052 

.22 

.0498 

March    , 

.  .    7.65 

.1217 

2.20 

.1053 

.22 

.0496 

April    ., 
M^y    .. 

.  .    7.65 

.1367 

2.20 

.1053 

.22 

.0495 

..    7.65 

.1244 

2.20 

.1053 

.22 

.0495 

June  . . 

.  .    7.65 

.1177 

2.20 

.1054 

.22 

.0495 

July    .. 

..    7.65 

.1200 

2.20 

.1054 

.23 

.0496 

Aug.    .. 

.  .    7.65 

.1317 

2.20 

.1054 

.23 

.04?  6 

Sept.    . 

.  .    7.65 

.1277 

2.20 

.1026 

.23 

.0532 

Oct.    .. 

.  .    7.65 

.1350 

2.20 

.1032 

.23 

.0536 

Nov.    . . 

..   7.65 

.1.362 

2.20 

.1023 

.23 

.0542 

Dec.   .. 

..    7.65 

.1516 

2.20 

.1024 

.23 

.0544 

68 


Combinations, 


MONTHLY  PRICES  OF  LAGER  BEER  AND  THE  MATE- 
RIALS   ENTERING    INTO    ITS    MANUFACTURE. 

(The  combination  manufacturing  a  large  quantity  of  this 
product  was  organized  in  August,   1898.) 


Product 

Materials. 

5»§ 

¥4 

n 
J' 

-5 

Year 

and 

month. 

2.T 

f 
T 

1 

a.    " 

si 

11 

^,1 

•SB 

o  a 

hi 

cr 

1807. 

Jan , 

.  .^ts.oo 

10.14 

10.10 

$0.14 

$0.22.56 

$0.2940 

Feb 

,  .    5.00 

.13 

.10 

.14 

.2250 

.28.59 

March    .... 

.  .    5.00 

.12 

.08 

.13 

.2.S75 

.281.3 

April    

M^y  

.  .    5.00 

.10 

.07 

.12 

.241".> 

..    6.00 

.10 

.06 

.12 

.242."> 

"•.1x7 

June   , 

.  .    5.00 

.07 

.2444 

^l^'.'-^S 

July 

.  .    6.00 

.09 

.06 

.12 

.2644 

.3o<M) 

Aug 

.  .    5.00 

.08 

.06 

.12 

.2937 

.3J45 

Sept    .- 

.  .    5.00 

.10 

.05 

.09 

.2!HV2 

..'',813 

Oct 

.  .  5.00 

.18 

.07 

.12 

.20.50 

.3518 

Nov 

..    5.00 

.18 

.12 

.17 

.LTii;;* 

.AUy.j 

Dec.    

.  .    5.00 

.18 

.12 

.18 

.26115 

.3555 

1898. 

Jan 

..    6.00 

.18 

.12 

.18 

.2713 

.32.38 

Feb 

.  .    6.00 

.19 

.15 

.17 

.2894 

.3387 

March    

.  .    6.00 

.18 

.14 

.16 

.2S1M 

.3737 

&f.::::: 

.  .    6.00 

.17 

.13 

.16 

..SJ(H) 

.4125 

.  .    6.00 

.16 

.12 

.14 

.34«59 

.4(575 

June   

.  .    6.00 

.14 

.10 

.13 

.32.37 

.3575 

July    

.  .    6.00 

.12 

.09 

.3.'i62 

.:{;na 

Aug 

.  .    6.00 

.12 

.09 

.10 

.317.5 

.3<;87 

Sept 

..    6.00 

.07 

.10 

.3025 

.3r,no 

Oct 

.     6.00 

.3081 

.3850 

Nov 

.  .    6.00 

.19 

.15 

.19 

.s.-ioo 

.4313 

Dec 

.  .    5.00 

.19 

.15 

.19 

.3556 

.4520 

1899. 

Jan 

. .    5.00 

.18 
.17 
.17 

.12 
.10 
.12 

.18 
.18 
.18 

.3668 
.3.525 
.34.56 

.4656 

Feb 

. .    5.00 

.4581 

March    

.  .    5.00 

.4485 

April    

May   

.  .    5.00 

.16 

.10 

.18 

.3462 

.4412 

.  .    5.00 

.16 

.10 

.18 

.3844 

.3912 

June   

.  .    5.00 

.16 

.12 

.18 

.3438 

.3817 

July     

. .  n.oo 

.16 

.3204 

..8910 

Aug 

.  .    5.00 

.15 

.11 

.18 

.3175 

.3713 

Sept 

.  .    5.00 

.12 

.10 

.15 

..3313 

.4005 

Oct 

.  .    5.00 

.14 

.10 

.14 

.3200 

.4162 

Nov 

.  .    .5.00 

.13 

.10 

.13 

.3200 

.4016 

Dec 

.  .    5.00 

.13 

.09 

.12 

.3075 

.3890 

Trusts  and  Monopolies.  69 

MONTHLY    PRICES     OF     PROOF     SPIRITS     AND    THE 

MATERIAL  ENTERING  INTO  ITS  MANUFACTURE. 

(The  combination  controlling  a  large  proportion  of  this 
product  was  organized  in  1887 ;  reorganized  1890,  1895  and 
1899.) 

"S^fl  ^^  ghj  o  s-gs 

Ef.*^  S'^  5'^  ®  *22 

^O  ^O  "^O  "^  OOfBO 


Year 

and 

month. 


1897. 

Jan $1,170 

Feb 1.165 

'March 1.165 

April    1.182 

May   1.187 

June   1.187 

July    1.187 

Aug 1.192 

Sept 1.203 

Oct 1.187 

Nov 1.184 

Dec 1.182 

1898. 

Jan 1.182 

Feb 1.186 

March 1.192 

April 1.197 

M&j     1.219 

June    1.224 

July   1.242 

Aug 1.242 

Sept 1.242 

Oct 1.242 

Nov 1.245 

Dec 1.252 

1899. 

Jan 1.247 

Feb 1.240 

March 1.240 

April    1.240 

May    1.240 

June    1.240 

July   1.240 

Aug 1.240 

Sept 1.210 

Oct. 1.220 

Nov 1.226 

Dec 1.225 


•c  !^  2"m»  "  •d?'^ 


z 

B^ 

5 

n  D"0 

■§5- 

^^ 

S 

"■iLS- 

p  1 

1" 

og: 

cr 

&eS 

a 

is 

io3 

s 

?B 

r- 

p3b 

$0,070 

$0,328 

$0,225 

$0,102 

.065 

.305 

.225 

.080 

.065 

.305 

.237 

.068 

.082 

.385 

.242 

.143 

.087 

.408 

.242 

.166 

.087 

.408 

.244 

.164 

.087 

.408 

.264 

.144 

.092 

.432 

.294 

.138 

.103 

.483 

.296 

.187 

.087 

.408 

.265 

.143 

.084 

.394 

.267 

.127 

.082 

.385 

.262 

.12S 

.082 

.394 

.271 

.123 

.086 

.413 

.289 

.124 

.092 

.442 

.289 

.153 

.097 

.466 

.321 

.145 

.119 

.571 

.347 

.224 

.124 

.595 

.324 

.271 

.142 

.682 

.336 

.346 

.142 

.682 

.317 

.365 

.142 

.682 

.302 

.380 

.142 

.682 

.308 

.374 

.145 

.696 

.331 

.365 

.152 

.730 

.356 

.374 

.147 

.689 

.367 

.322 

.140 

.656 

.352 

.304 

.140 

.656 

.346 

.310 

.140 

.656 

.347 

.309 

.140 

.656 

.334 

.322 

.140 

.656 

.844 

.312 

.140 

.656 

.329 

.327 

.140 

.656 

.317 

.339 

.110 

.516 

.331 

.185 

.120 

.563 

.320 

.243 

.126 

.591 

.316 

.275 

.125 

.587 

.305 

.282 

70 


Combinations, 


MONTHLY    PRICES    OF    REFINED    EXPORT    OIL    AND 

THE   MATERIAL   ENTERING   INTO    ITS 

MANUFACTURE,  1897  TO  1899. 

(The  combination  controlling  82.3  per  cent,  of  thla  prod- 
uct  was    organized   In   1882.) 

Product —  Material —          Difference, 

refined  ex-  crude  oil 

Year  and  month.           port  oil  at  at  OH  City 

New  York,  per  gallon, 
per  gallon. 
1897. 

Jan $0.0613  $0.0210                  $0.0403 

Feb 062«  .0215  .0411 

March 0686  .0219  .0417 

AprU 0613  .0205  .0408 

May  0623  .0206  .0417 

June 0614  .0205  .0409 

July 0587  .0185  .0402 

Aug 0575  .0169  .0406 

Sept 0574  .0166  .0408 

Oct 0555  .0161  .0894 

Nov 0540  .0155  .0385 

Dec 0540  .0155  .0385 

1898. 

Jan *. 0640  .0150  .0390 

Feb 0550  .0161  .0389 

March 0582  .0187  .0395 

April 0567  .0176  .0391 

May 0601  .0196  .0406 

June  0616  .0207  .0409 

July 0626  .0222  .0404 

Aug 0644  .0232  .0412 

Sept 0663  .0242  .0421 

Oct 0721  .0269  .0452 

Not 0735  .0277  .0458 

Dec 0742  .0279  .0463 

1899. 

Jan *. 0743  .0728  .0465 

Feb 0740  .0274  .0466 

March 0734  .0269  .0465 

April 0705  .0269  .0436 

May 0699  .0269  .0430 

Juna 0720  .0270  .0450 

July  0761  .0292  .0469 

Aug 0782  .0304  .0478 

Seirt.  0863  .0344  .0519 

Oct 0900  .0360  ,0540 

Nov 0940  .0375  .0566 

Dec 0985  .0413  .0572 


Trusts  and  Monopolies. 


711 


MONTHLY     PRICES     OF     GRANULATED     SUGAR     AND 
THE   MATERIAL   ENTERING   INTO   ITS   MANU- 
FACTURE AT  NEW  YORK,  1897  TO  1899. 

(The  combination   controlling  a  large   proportion  of  thi8 
product  was  organized  in  1887.) 

Product —  Material — 

Year  and                granulated  sugar  96°           Difference, 

month.                 sugar,  per  centrifugal, 

pound.  per  pound. 

1897. 

January  $0.04052  $0,03180       $0.00872 

February 04070  .03215  .00855 

March 04140  .03248  .00892 

April  04332  .03306  .01026 

May  04260  .03280  .00980 

June 04410  .03453  ,00957 

July  04606  .03600  .01006 

August  04720  .03750  .00970 

September 04803  .03876  .00927 

October  04818  .03843  .00975 

November 04720  .03843  .0087T 

December 04840  .04038  .00802 

1898. 

January 04936  .04132  .00804 

February 04945  .04150  .00795 

March  04865  .04098  .00767 

April  04993  .04156  .00837 

May  05098  .04230  .00868 

June 05080  .04286  .00794 

July  05080  .04125  .00955 

August 05080  .04234  .00846 

September 05172  .04349  .00823 

October  04735  .04238  .00497 

November 04880  .04385  .00495 

December  04846  .04401  .00445 

1899. 

January  04711  .04280  .00431 

February 04720  .04326  .003iH 

March  04816  .04395  .00421 

April  04930  .04578  .00352 

May  05080  .04656  .00424 

June  05184  .04626  .00558 

July  05210  .04453  .00757 

August  05122  .04524  .00598 

September 04874  .04375  .00499 

October 04795  .04310  .00485 

November  04795  .04265  .00530 

December  04795  .04250  .00545 


72 


Combinations, 


MONTHLY    PRICES    OF    STABCH   AND    GLUCOSE   AND 

THE  MATERIAL  ENTERING  INTO  THEIR 

MANUFACTURE,  1897  TO  1899. 

(The  combination  controlling  90  to  05  per  cent,  of  tbese 
products   was   organized    In   August,    1897.) 


Pearl 
lYear  and  starch, 

month  per  100 

lbs. 
1897. 

January    |0.84 

February 79 

March    83 

Anril 86 

(MDay    84 

June 96 

July    1.07 

August    1.41 

September    1.41 

October    1.19 

November    1.05^ 

December    1.04^ 

1898. 

January     1-01 V^ 

February    1.03 

March    1.18 

April     1.19 

M^y    1.27 

June    1.36 

July   1.22 

August     1.25 

September    1.38 

October    1.25 

November     1.26 

December    1.16 

1899. 

January    1.22 

February    1.22% 

March    1.28 

April        1.23% 

(May    1.23% 

June   1.25 

July    L.'Jl 

August    1.29 

September    1.1  {> 

October    1.28 

November    1.86 

December    1.18 


Products. 

Crystal 

Mixing 
and  jelly. 

Material 

glucose, 

— corn. 

per  100 

glucose,  per 

per  bush. 

lbs. 

100  lbs. 

$0.77 

10.72 

$0.1978 

.74 

.70 

.1851 

.75 

.72 

.1983 

.78 

.72 

.2261 

.80 

.77 

.2348 

.87 

.84 

.'2VM 

1.04 

1.00 

.2577 

1.75 

1.45 

.2'.i5t> 

1.75 

1.55 

.2051) 

1.75 

1.15 

.2675 

1.60 

1.25 

.2661 

1.52% 

1.30 

.2657 

1.55 

1.30 

.2678 

1.60 

1.30 

.l'7i»7 

1.50 

1.15 

.21»(t6 

1.45 

1.15 

.2983 

1.45 

1.15 

.3440 

1.22 

1.08 

.3215 

1.17% 

1.02% 

..3222 

1.20 

1.07 

.3374 

1.22 

1.08% 

.3105 

1.45 

1.11 

.3049 

1.28% 

1.13 

.3278 

1.28 

1.15 

.3262 

1.23 

1.08 

.3335 

1.20 

1.09 

.3384 

1.19 

1.12 

.3241 

1.18 

1.12 

.3362 

1.19% 

1.13 

.3272 

1.29 

1.26 

.3106 

1.28 

1.20% 

.3242 

1.27 

1.20 

.3150 

1.23 

1.16% 

.3144 

1.25 

1.18 

.3197 

1.24 

1.15 

.3162 

1.16 

1.04 

.3090 

Trusts  and  Monopolies. 


73 


MONTHLY   PRICES   OF  AMERICAN   TIN   PLATES   AND 

THE  MATERIALS  ENTERING  INTO  THEIR 

MANUFACTURE,   1897  TO  1899. 

(The  combination  controlling  95  per  cent,  of  this  product 
was  organized  in  1898.) 


Year 

Product  — 

glates,       Amer 
iessemer  coke 
20,    at    New    Y 
per  108  lbs. 

©OS  2. 

P 

i 

and 
month. 

a"" 

1 

? 

®'*  ?r_ 

M^ 

-pS- 

r?Ss 

^1 

¥¥l 

1897 

. 

Jan 

$3.40 

$0.3300 

$0.7131 

$1.0431 

$2.3569 

Feb 

3.30 

.3350 

.7258 

1.0608 

2.2392 

March    . . . 

3.35 

.3300 

.7352 

1.0652 

2.2848 

April    .... 
May    

3.40 

.3300 

.7352 

1.0652 

2.3348 

3.40 

.3300 

.7371 

1.0671 

2.3329 

June    

3.35 

.3400 

.7281 

1.0681 

2.2810 

July    

3.30 

.3450 

Aug 

3.20 

.3450 

Sept 

3.15 

.3400 

.6928 

1.0328 

2.1172 

Oct 

3.15 

.3400 

.7098 

1.0498 

2.1002 

Nov 

3.15 

.3400 

.6834 

1.0234 

2.1266 

Dec 

3.15 

.3400 

.6509 

0.9909 

2.1591 

1898 

Jan 

3.15 

.3450 

.6561 

1.0011 

2.1489 

Feb 

3.13 

.3500 

.6603 

1.0103 

2.1397 

March    ... 

3.15 

.3550 

.6594 

1.0144 

2.1356 

April     . . . 

3.10 

.3600 

.6613 

1.0213 

2.0787 

May   

3.10 

.3675 

.6669 

1.0344 

2.0656 

June    

3.10 

.3750 

.7102 

1.0852 

2.0148 

July    

3.05 

.3850 

.6989 

1.0839 

1.9661 

Aug 

3.00 

.3950 

.6961 

1.0811 

1.9089 

Kept.     . . . 

3.00 

.4050 

.6942 

1.0992 

1.9008 

Oct 

2.90 

.4250 

.7022 

1.1272 

1.7728 

Nov 

2.95 

.4500 

.7112 

1.1612 

1.7888 

Dec.    .... 

3.10 

.4650 

.6947 

1.1597 

1.9403 

1899 

Jan 

3.34 

.5500 

.7314 

1.2814 

2.0586 

Feb 

3.84 

,5750 

.7055 

1.2805 

2.5595 

March    ... 

4.21  i/a 

.5875 

.6886 

1.2761 

2.9389 

April    .... 
M^y    .... 

4.21% 

.6250 

.7649 

1.3899 

2.8251 

4.21  Va 

.6350 

.7192 

1.3542 

2.8608 

June   .... 

4.21% 
4.7H/a 

.6400 

.7107 

1.3507 

2.8643 

July    

.7125 

.8091 

1.5216 

3.1934 

Aug 

5.00 

.7750 

1.2476 

2.0226 

2.9774 

Sept 

5.00 

.7900 

1.2651 

2.0551 

2.9449 

Oct 

5.00 

.7800 

1.5717 

2.3517 

2.6483 

Nov 

5.00 

.7000 

1.5255 

2.2255 

2.7745 

Dec 

5.00 

74  Combinations, 

MONTHLY    PRICES    OF    PIG    IROX,    STEEL,    BILLETS, 
RAILS,  ETC.,   1897  TO   1899. 
(The  combinations  controlling  the  most  of  these  products 
were    organized   In    December,   1898,   and   the   first  half  of 
1899.) 

Pig  Iron. 


•og-hj  gTJ-i  5:2.5^  ^o'^o  pc-a  "ssci 

Year         »..-|  ^Sl  If-  ^1"  "I  {|.^ 

and           r^  ^.^1  p-  rt?  ^'  ^;? 

month.        j-S^J  I^S-  ^?t^  5^  -  ^g? 

S^?  o^r-  ito^  '  ^^  '  ^- 

1897. 

Jan 111.02  $13.50  $9.31     $11.06  flO.77  ?9.66 

Feb 11.00  13.50  9.00  11.00  10.72  9.54 

March    10.88  13.50  8.94  10.65  10.57  9.41 

April    10.75  13.50  8.40  10.50  9.91  8.85 

May    10.38  13.00  8.19  10.25  9.52  8.70 

June    10.25  13.00  8.25  10.10  9.74  8.36 

July    10.25  13.00  8.45  10.19  9.39  8.36 

Aug 10.25  13.00  8.45  10.05  9.54  8.29 

Sept,    10.40  12.00  8.80  10.50  10.04  8.85 

Oct 11.00  12.50  9.00  10.50  10.70  9.75 

Nov 11.00  12.50  9.00  10.50  10.52  9.56 

Dec 11.00  12.50  9.00  10.50  10.09  9.00 

1898. 

Jan 11.00  12.50  9.00  10.37  10.00  9.00 

Feb 10.93  11.50  8.75  10.25  10.06  8.97 

March    10.75  11.50  8.55  10.25  10.37  9.06 

April    10.91  11.50  8.50  10.25  10.35  9.22 

May    11.00  11.50  8.62  10.25  10.41  9.12 

June     11.00  11.50  8.55  10.25  10.42  9.14 

July   11.00  11.50  8.38  10.25  10.25  9.11 

Aug 11.00  11.50  8.37  10.25  10.35  9.19 

Sept 11.00  11.50  8.55  10.19  10.45  9.36 

Oct 11.00  11.50  8.75  10.00  10.40  9.33 

Nov 11.00  11.50  8.75  10.00  10.22  9.24 

Dec 11.00  11.50  8.90  10.41  10.64  9.46 

1899.  , 

Jan 11.12  11.50  9.56  10.75  11.00  9.89 

Feb 12.12  12.50  10.42  11.69  11.69  10.87 

March    14.60  15.75  12.70  14.37  14.77  13.29 

April    15.12  17.00  13.25  15.00  15.06  14.50 

May    15.37  17.25  13.43  15.30  16.32  15.07 

June    17.60  19.50  14.85  16.50  18.70  15.04 

July     19.50  21.50  16.25  17.81  20.45  17.50 

Aug 20.50  22.50  17.25  18.10  22.37  18.37 

Sept 23.00  24.50  19.00  19.50  23.85  20.90 

Oct 23.00  25.00  19.25  10.65  24.50  21.19 

Nov 23.50  25.50  19.25  20.19  24.69  21.56 

Dec 23.50  25.50  19.12%  20.31  25.00  21.52 


Trusts  and  Monopolies.  75 


Year  '  ff 

and  Ig. 

month.  M^ 

^5rJ• 

©=? 

1897. 

January     ....  $15.42 

B^ebruary 15.23 

March    15.44 

April    14.00 

May    13.82 

June    14.06 

July   14.00 

August    14.00 

September     . .  15.60 

October    16.44 

November    . . .  15.57 

December   ....  15.00 

1898. 

January    14.93 

February 15.06 

March    15.25 

April    15.06 

May    14.85 

June    14.65 

July    14.50 

August    15.85 

September  . . .  16.00 

October    15.56 

November    . . .  15.06 

December   ....  15.80 

1899. 

January   16.62 

February  ....  18.00 

March    24.30 

April    25.37 

May    26.75 

June    30.10 

July   33.12 

August 35.62 

September  . . .  38.37 

October    33.75 

November    . . .  36.50 

December  ....  38.75 


;teel  billets^  rails. 

ETC. 

Slabs 
8    in. 
burg, 
lbs. 

^^1 

tin  « 

•1  EB 

%^^ 

-s. 

^ii. 

rf^B 

*^^o- 

>-;•  — 

oa 

OTVJ 

f  5" 

$15.14 

$16.92 

$25.00 

15.41 

16.75 

20.00 

15.61 

16.94 

18.00 

15.61 

16.10 

18.00 

15.65 

15.32 

18.00 

15.46 

15.56 

18.00 

15.50 

18.00 

15.50 

18.00 

14.71 

17.10 

18.00 

15.07 

17.94 

18.00 

14.51 

17.07 

18.00 

13.82 

16.50 

18.00 

13.03 

16.43 

18.00 

14.02 

16.56 

18.00 

14.00 

16.75 

18.00 

14.04 

16.56 

18.00 

14.16 

16.35 

18.00 

15.08 

16.15 

17.50 

14.84 

16.00 

17.00 

14.78 

17.35 

18.00 

14.74 

17.50 

17.50 

14.91 

17.06 

17.50 

15.10 

16.56 

17.00 

14.75 

17.30 

17.50 

15.53 

18.12 

18.50 

14.98 

19.50 

20.25 

14.62 

25.80 

24.80 

16.24 

26.87 

25.75 

15.27 

28.25 

25.20 

15.09 

31.60 

27.25 

17.18 

35.50 

28.25 

26.49 

38.50 

31.00 

26.86 

40.50 

32.50 

33.37 

40.50 

34.00 

32.39 

35.50 

35.00 

34.50 

35.00 

76  Combinations, 

MONTHLY   PRICES   OF    FINISHED   IRON   AND    STEEL, 
1897    TO    1899. 

(The  combinations  controlling  the  most  of  these  products 

were   organized  in   December,   1898,   and   the   first   half  of 
1890.) 

ana  -"gi  iS'l  fi  SS| 

month.  2  '^  '^-  tr-*  '  -  ^3 

1897.  •    ■^'" 

January     |1.25  |1.40  |1.15  fl.22 

February     1.25  1.40  1.15  1.20 

March    112%  1.40  1.14  1.20 

April     1.05  1.25  1.15  1.14 

May    1.05  1.25  1.10  1.04 

June     1.00  1.25  1.07  .99 

July     1.07V6  1.25  1.08  .95 

August     1.10  1.25  1.08  .99 

September     ...  1.10  1.25  1.14  1.07 

October     1.15  1.35  1.10  1.15 

November     1.10  1.35  1.20  1.15 

December    1.10  1.35  1.15  1.15 

1898 

January     ..*...  1.05  1.40  1.11  l.i;^ 

February     1.05  1.35  1.11  1.15 

March     1.05  1.35  1.06  1.05 

April    1.07%  1.25  1.05  1.05 

Mjay     1.10  1.25  1.05  1.05 

June     1.12%  1.25  1.05  1.05 

July     1.02%  1.25  1.00  1.05 

August     1.05  1.25  1.06  1.05 

September     ...  1.05  1.25  1.14  1.08 

October    1.05  1.25  1.13  1.10 

November    102%  1.25  1.10  1.04 

December    1.05  1.25  1.11  1.00 

1899. 

January     1.05  1.30  1.15  1.12 

February     1.15  1.45  1.20  1.22 

March     1.45  1.70  1.41  1.38 

April    1.57%  1.75  1.50  1.65 

M^y     1.62%  1.90  1.56  1.75 

June     1.80  2.00  1.81  1.88 

July    1.85  2.30  2.00  2.00 

August     2.00  2.40  2.00  2.28 

September    ....  2.25  2.50  2.10  2.50 

October     2.30  2.50  2.10  2.60 

November    2.30  2.50  2.20  2.56 

December    2.30  2.50  2.05  2.50 


Trusts  and  Monopolies.  77 

MON'THLY  PRICES    OF    FINISHED   IRON   AND   STEEL. 


Year 

and 

month. 


ChtK 


p  O 


a 
£.0- 

Si 


200a 


p 


2  fO  !» 

Em 


1897. 

January    $1.20 

February    . . .   1.20 

March    1.20 

April     1.20 

May    1.11 

June     1.10 

July     1.10 

August     ....    1.08 
September    . .   1.14 

October     1.15 

November     . .   1.14 
December  . . ,  1.13 


$1.70 
1.70 
1.70 
1.70 
1.49 
1.25 
1.15 
1.15 
1.15 
1.20 
1.20 
1.20 


$1.25 
1.25 
1.25 
1.20 
1.15 
1.15 
1.10 

i.i2y2 

1.17^ 
1.20 
1.20 
1.20 


$20.99 
21.18 
19.57 
19.43 
18.92 
18.83 
18.83 
18.93 
19.82 
21.63 
20.91 
19.62 


$2.15 
2.12^' 
2.07  Ml 
2.021^ 
2.00 
1.90 
1.95 
2.05 
2.05 
2.15 
2.20 
2.15 


1898. 

January     ....  1.10 

February    . . .  1.10 

March     1.08 

April     1.12 

M^y    1.21 

June     1.23 

July     1.20 

August     1.23 

September    . .  1.27 

October    1.27 

November    ...  1.25 

December    . . .  1.26 


1.30 
1.30 
1.30 
1.30 
1.30 
1.30 
1.30 
1.37 
1.40 
1.38 
1.35 
1.35 


1.30 
1.15 
1.15 
1.30 
1.25 
1.20 
1.20 
1.30 
1.30 
1.30 
1.30 
1.30 


19.77 
19.87 
19.70 
19.86 
19.29 
19.24 
19.24 
19.33 
20.71 
20.81 
20.33 
20.22 


2.10 

2.07%' 

2.05 

2.00 

2.05 

1.95      I 

1.95 

2.00 

2.05 

2.00 

2.00      , 

1.95 


1899. 

January     ....  1.35 

February    . . .  1.55 

March     1.89 

April     2.18 

M^ay     2.23 

June    2.48 

July    2.65 

August     2.80 

September    . .  3.00 

October    3.00 

November     . .  2.65 

December   . . .  2.40 


1.40 
1.42 
1.55 
1.64 
1.63 
1.82 
2.15 
2.40 
2.40 
2.40 
2.40 
2.40 


1.40 
1.40 
1.55 
1.75 
1.75 
1.90 
2.15 
2.25 
2.40 
2.40 
2.40 
2.40 


20.62 
21.91 
25.59 
30.13 
33.92 
37.88 
42.65 
46.00 
44.22 
45.82 
42.82 
37.29 


2.00 
2.35 
2.45 
2.80 
2.95 
3.05 
3.15 
3.20 
3.25 
3.15 
3.10 
3.00 


78 


Combinations, 


MONTHLY  PRICES   OF   FINISHED  IRON  AND  STEEL. 


Year         ^  S  g^ 

2  w 
and  "2, 

o-    ^ 

month.        1    — 

^? 

1897. 

Jan $1.76 

Feb 1.73 

March    1.70 

April    1.70 

Way    1.68 

June    1.64 

July    1.60 

Aug.     1.60 

8ept 1.70 

Oct 1.70 

Nov 1.69 

Dec    1.75 

1898. 

Jan 1.71 

Feb 1.75 

March     1.77 

April    1.65 

May   1.66 

June    1.70 

July    1.70 

Aug 1.65 

Sept 1.67 

Oct 1.71 

Nov 1.71 

Dec.    1.60 

1899. 

Jan 1.88 

Feb 2.02 

March    2.43 

Anril    2.60 

May    2.70 

June    2.90% 

July    3.02% 

Aug 8.10 

Sept 3.36% 

Oct 3.55 

Nov 3.55 

Dec 3.47% 


asg' 

a^2 

^^2 

a?^ 

^^n 

1^ 

5" 

1^ 

^I'- 
ll 

^^3 

h 

•o.'* 

•o 

■o 

**» 

•s  = 

*» 

^* 

«p 

t  r* 

1  a 

►1  r* 

•t  rf 

t  r* 

n.90 

$1.50 

$1.28 

$1.39 

$1.47 

1.85 

1.50 

1.25 

1.35 

1.45 

1.90 

1.45 

1.25 

1.40 

1.50 

1.80 

1.40 

1.25 

1.40 

1.47 

1.80 

1.35 

1.23 

1.35 

1.43 

1.75 

1.30 

1.23 

1.31 

1.41 

1.75 

1.35 

1.20 

1.25 

1.35 

1.65 

1.40 

1.19 

1.26 

1.36 

1.80 

1.40 

1.19 

1.41 

1.49 

1.80 

1.55 

1.28 

1.49 

l.o4 

1.80 

1.45 

1.14 

1.41 

1.49 

1.80 

1.45 

1.12 

1.39 

1.49 

1.00 

1.45 

1.10 

1.43 

1.55 

1.90 

1.45 

1.10 

1.45 

1.57 

1.00 

1.47% 
1.37% 

1.10 

1.43 

1.55 

1.87% 

1.08 

1.31 

1.47 

1.80 

1.35 

1.08 

1.31 

1.45 

1.80 

1.35 

1.06 

1.35 

1.43 

1.80 

1.35 

1.06 

1.31 

1.36 

1.80 

1.35 

1.05 

1.26 

1.36 

1.80 

1.35 

1.08 

1.32 

1.43 

1.82% 

1.35 

1.10 

1.33 

1.46 

1.82% 

1.35 

1.10 

1.28 

1.39 

1.82% 

1.35 

1.10 

1.27 

1.37 

2.05 

1.40 

1.18 

1.43 

1.50 

2.25 

1.40 

1.22 

1.57 

1.73 

2.62% 

1.65 

1.48 

1.94 

2.09 

2.80 

1.85 

1.67 

2.05 

2.25 

2.95 

1.90 

1.65 

2.10 

2.35 

3.20 

2.00 

1.97 

2.30 

2.57 

3.30 

2.30 

2.20 

2.42% 

2.70 

3.40 

2.35 

2.20 

2.50 

2.80 

3.67% 

2.55 

2.50 

2.76% 

3.06 

3.77% 

2.70 

2.50 

2.95 

3.17 

3.88 

2.80 

2.40 

2.95 

3.28 

4.13 

2.80 

2.45 

2.87% 

3.28 

Trusts  and  Monopolies.  79 

MONTHLY   PRICES    OF    FINISHED   IRON   AND   STEEL. 


Machinery 

steel,  open 

Year  and  month.  hearth,  at 

Chicago, 

per  cwt. 

1897. 

January   $1.60 

February 1.57i^ 

March 1.55 

April    1.55 

May 1.50 

June    1.50 

July     1.45 

August    1.40 

September 1.45 

October    1.60 

November 1.60 

December  1.60 


Spring 

Black 

steel,  at 

merchant 

Chicago, 

pipe,  %  in. 

per  cwt. 

to  8  in. 

per  ton. 

$1.85 

$35.70 

1.80 

36.09 

1.75 

33.80 

1.75 

32.54 

1.60 

32.21 

1.60 

32.26 

1.55 

33.58 

1.60 

33.67 

1.70 

34.98 

1.65 

35.58 

1.65 

35.62 

1.65 

36.09 

1898. 

January    1.60 

February    1.60 

March    1.60 

April    1.60 

May    1.50 

June    1.50 

July    1.50 

August    1.50 

September 1.55 

October 1.55 

November 1.55 

December  1.55 


1890. 

January    1.55 

February 1.60 

March   2.10 

April    2.40 

May   2.40 

June    2.55 

July    2.70 

August    2.90 

September    2.95 

October    2.1)5 

November  . . . . , 2.95 

December 2.95 


1.65 

35.10 

1.65 

33.75 

1.60 

33.90 

1.60 

27.97 

1.60 

27.92 

1.60 

27.62 

1.60 

28.37 

1.60 

28.64 

1.60 

31.46 

1.60 

32.44 

1.60 

33.42 

1.60 

83.83 

1.60 

35.43 

1.75 

32.62 

2.25 

32.12 

2.40 

34.94 

2.50 

36.13 

2.85 

40.48 

3.20 

47.84 

3.20 

64.07 

3.50 

66.80 

3.60 

77.09 

3.60 

79.76 

3.60 

81.65 

8o  Combinations, 

MONTHLY    PEICES    OF    OLD    MATERIAL,    COAL    AND 

COKE,  1897  TO  1899. 

(The  combinations  controlling  the  most  of  these  products 
were  organized  In  1898,  and  the  first  half  of  1899.) 

Year  ^S2 

M        Q, 

and  i*    5" 

month.  SS 

1897. 

January   $12.00 

February    13.00 

March    11.75 

April    11.50 

May   11.00 

June   10.50 

July    11.00 

August    11.00 

September    12.00 

C»ctober     12.25 

November 12.00 

December 12.00 

1898. 

January    12.25 

February    12.25 

March    12.00 

April 12.00 

Alaj   12.25 

June    12.37% 

July   12.50 

August    12.50 

September    12.62% 

October 12.75 

November 12.75 

December 12.50 

1899. 

January    13.00 

February    14.00 

March 16.25 

April 18.00 

Mfay   18.00 

June    18.00 

July   18.75 

August    21.00 

September    27.50 

October    30.00 

November 30.00 

December  27.00 


tC-5  O  3Q 

lOf^OB 

li^l 

■pi 

',> 

n 

«§M 

^m 

17.00 

17.00 

7.00 

7.00 

7.00 

7.25 

6.75 

7.50 

6.00 

7.00 

5.50 

7.00 

5.75 

7.25 

6.75 

7.25 

6.50 

7.25 

7.00 

7.50 

6.50 

7.50 

6.50 

7.50 

6.50 

7.50 

6.75 

8.25 

7.00 

8.00 

7.00 

8.50 

6.50 

8.75 

6.50 

8.00 

6.50 

7.75 

6.50 

8.00 

6.62% 

8.25 

6.75 

8.1i5 

6.25 

8.ii5 

6.75 

8.25 

7.00 

8.25 

7.75 

9.00 

8.75 

11.50 

9.00 

12.00 

9.00 

11.50 

8.75 

11.50 

8.50 

12  00 

9.00 

12.50 

13.00 

15.00 

14.50 

16.00 

13.50 

15.50 

13.00 

14.00 

Trusts  and  Monopolies.  8i! 

MONTHLY    PRICES    OF    OLD    MATERIAL,    COAL    AND 
COKE. 

xear  -^tra^o 

month.  P°^o 


<pp  s 


1897. 


January     $2.70 

February    2.70 

March 2.70 

April    2.70 

May     2.70 

June    2.70 

July   

August    

September 

October    2.70 

November 2.70 

December  2.70 

1898. 

January    2.75 

February    2.75 

March    2.75 

April    2.75 

M^y    2.75 

June    2.75 

July    2.75 

August    2.75 

September    2.75 

October     2.75 

November 2.75 

December    2.75 

1899. 

January   2.45 

February    2.45 

March 2.45 

April     2.45 

May 2.45 

June    2.45 

July   2.45 

August    2.50 

September  . .  ^ 2.50 

October    2.75 

November 3.00                      2.87^                  6.50 

December    3.00                    2.87%                 6.75 


MSsSo 

too  -4  O 

oke, 
ellsvll 
t    ove 
,000  1 

oke.  F 
ania, 
ago, 
,000  1 

CD  r 

o*     (0  (a 

Con- 
,f.o.b. 
8,   per 

8. 

00        r+B 

►1  TV 

$1.87  Va 

?4.55 

1.87% 

4.55 

1.62  Va 

4.55 

1.55 

4.55 

1.40 

4.55 

1.50 

4.55 

1.50 

4.55 

1.50 

4.55 

1.45 

4.55 

1.62% 

4.55 

1.75 

4.55 

1.75 

4.55 

1.75 

4.55 

1.75 

4.55 

1.75 

4.40 

1.75 

4.40 

1.75 

4.40 

1.75 

4.40 

1.76 

4.40 

1.75 

4.40 

1.75 

4.40 

1.50 

4.50 

1.50 

4.4a 

1.60 

4.40 

1.60 

4.55 

1.60 

4.55 

1.75 

4.55 

1.75 

4.55 

2.05 

4.55 

2.20 

4.55 

2.12% 

4.75 

2.50 

4.75 

2.62% 

5.25 

2.75 

5.50 

82  Combinations, 

MONTHLY  PRICES  OF  SMOOTH  WIRE,  1897  TO  1899. 
(The  combination  controlling  from   75  to  98  per  cent  of 
this  product  was  organized  in  January,  1899.) 

1897. 

January    $1.21 

February 1.15 

March 1.16 

April    1.15 

May    1.12% 

June 1.15 

July   1.10 

August    1.10 

September    1.14 

October    1.20 

November    1-17% 

December   1.17 

1898. 

January    1.18 

February    1.18 

March    1.20 

April 1.18 

May   1.15 

June    1.15 

July   1.15 

August    1.15 

September    1.15 

October    1.15 

November    1.15 

December    1.12 

1899. 

January    1.29 

February lA6\i 

MaFch 1.79 

April     1.92% 

May    1.95 

June   2.15 

July    2.37% 

August    2.50 

September    2.76% 

October     2.95 

November     2.95 

December   2.87  % 

We  then  find  the  following  variation  in  prices 
between  December,  1898,  and  December,  1899. 

Corn    decreased . . .   14.32    per  cent. 

Wheat    increased. ..  .00.75 

Parlev    decreased .  .  .   '13.94 

Kye  No.  2 decreased. . .     6.13 

Oats   decreased. . .    15.90 

Hops     decreased . . .   40.00 

Refined  Sugar decreas-^d . . .      1.05 

Sugar,   raw    decreased . . .      3.43 

Refined  export  oil    Increased. . .  32.74 


Trusts  and  Monopolies. 


83 


Crude  oil    increased . . .   48.02 

Proof    Spirits decreased. . .   17.76 

Lager  beer    000 0000 

Cheroots    000 0000 

Cigarettes 000 0000 

Smoking  tobacco increased . . .     4.54 

High  grade  leaf  tobacco decreased...     1.43 

Medium  grade  leaf  tobacco. ..  .decreased. . .     2.19 

Low    grade    leaf    tobacco increased...     9.23 

Soda  crackers  XXX increased . . .     8.33 

Soda  crackers,  standard 000 0000 

Ginger  snaps  XXX 000 0000 

Flour,  spring  wheat,  patent  process, 

increased. . .  0.29 
Flour,  good  spring  supers  low  grade, 

decreased. . .     7.87 

Flour,  winter  wheat decreased. . .     3.12 

Lard,    steam    refined increased...      1.1.5 

Rye  flour,  good  to  choice decreased. . .      2.10 

Corn   meal,    white increased . . .      5.00 

Oat  meal    increased .  . .   16.21 

Rolled   oats    increased . .  .    18.18 

Tearl   starch    increased .  . .      1.72 

Glucose    decreased ....    9.37 

Mixing  and  jelly  glucose decreased.  . .     9.56 

Coal   increased . . .      9.09 

Coke,  Connellsville   increased.  .  .   79.68 

Coke,    Pennsylvania increased .  . .   30.68 

American  tin  plate increased. . .  •61.2;) 

Pig    tin increased .  .  .  ^0.53 

Steel  billets  and  slabs increased.  .  .119.59 

Machinery,    steel increased . . .   90.32 

Spring   steel    increased .  .  .  125.00 

Black  merchant  pipe increased. .  .141.35 

Old  iron  rails Increased . . .  116.00 

Scrap  No.  1 increased.  .  .  i)2.59 

Scrap  cast   increased. . .   69.69 

Pig  iron,  foundry  No.  2 increased.  .  .113.63 

Bessemer   pig   iron increased .  .  .  134.96 

Steel  billets increased . .  .  145.25 

Slabs increased .  .  .   99.42 

Steel  rails    increased .  . .  100.00 

Charcoal,  Lake  Superior increased.  .  .121.74 

Gray   forge  pig  Iron increased.  .  .127.48 

Bar  Iron    increased .  . .  119.04 

Bar  iron,  best  refined increased.  .  .100.00 

Bar  iron,  all   muck    Increased.  .  .150.00 

Steel  tank  plates increased.  . .  -90.47 

Steel  beams Increased.  . .   77.77 

Steel   Angles    increased .  . .   84.61 

Skelp   (plates) increased. . .   84.42 

Steel  sheets increased .  . .   53.84 

Barbed    iron,    galvanized increased . . .  117.18 

Smooth  wire   increased . . .  156.69 

Cut  steel  nails Increased. .  .107.40 

Cut  nails   increased. .  .122.72 

Wire  nails   increased . . .  139.42 


84  Combinations, 

It  then  appears  that  of  the  articles  shown  fifteen 
show  a  decrease  in  price,  five  show  stationary 
prices,  while  all  the  remaining  articles  show  an 
increase.  The  average  increase  shown  by  all  articles 
exclusive  of  iron  and  steel  and  their  products  is 
three  and  thirty-five  hundredths  per  cent.,  while 
the  average  increase  sho^vn  by  iron  and  steel  and 
their  products  including  tin  plate  is  one  hundred 
seven  and  thirty-two  hundredths  per  cent.  Thus 
we  see  that  there  is  an  average  increase  in  the 
price  of  the  products  of  iron  and  steel  over  and 
above  that  shown  by  other  articles  amounting  to 
one  hundred  three  and  ninety-seven  hundredths 
per  cent.,  and  as  it  appears  from  the  notes  to  the 
several  preceding  tables  that  combinations  control- 
ling the  greater  part  of  these  latter  products  were 
organized  during  the  year  1898  and  the  early  part 
of  1899,  it  seems  that  this  enormous  increase  in 
prices  may  be  fairly  chargeable  to  the  effect  of 
combinations. 

The  power  of  monopolies  to  regulate  prices  by 
controlling  the  supply  would  appear  to  carry  with 
'it  the  power,  to  a  limited  extent  at  least,  to  regu- 
late wages  by  increasing  or  diminishing  the  de- 
:inand  for  labor  within  certain  lines  of  employ- 
ment, but,  as  will  presently  be  seen,  this  power  is 
likely  to  prove  to  be  much  less  effective  than  we 
might  at  first  be  led  to  believe.  Labor  is  only 
temporarily  dependent  upon  the  demand  for  pro- 
duction of  the  articles  controlled  by  the  monopoly, 
and  as  soon  as  the  intention  of  the  monopoly  to 
restrict  production  has  been  recognized,  labor  will 
seek  employment  elsewhere.  In  those  classes  of 
employment  in  which  a  greater  or  less  amount  of 


Trusts  and  Monopolies.  85 

special  skill  is  required  which,  it  has  perhaps  taken 
a  considerable  length  of  time  to  acquire,  the  mo- 
nopoly will  have  more  complete  control  over  its 
employees  than  in  other  employments,  for  the  em- 
ployees will  be  very  reluctant  to  abandon  the 
trade  of  special  skill  which  they  have  labored  so 
hard  to  acquire,  and  they  will  be  inclined  to  de- 
pend upon  the  old  employment,  so  long  as  the  com- 
pensation does  not  fall  too  far  below  that  which  is 
paid  for  other  classes  of  work. 

The  supply  of  labor  resembles  the  supply  of 
water  which  is  continually  flowing  onward  in  a 
mighty  stream  to  supply  the  wants  of  all  mankind. 
These  artificial  restrictions  such  as  place,  skill,  as- 
sociation, etc.,  are  mere  temporary  dams  con- 
fining portions  of  its  volume  within  certain  limits 
for  a  time,  but  if  subjected  to  undue  pressure,  it 
soon  overflows  its  barriers  and  rejoins  the  main 
stream.  This  movement  of  labor  to  preserve  its 
general  level  is  constant  throughout  the  civilized 
world.  It  moves  from  employment  to  employment, 
from  state  to  state,  from  nation  to  nation,  and 
even  into  the  uncivilized  portions  of  the  globe,  in 
obedience  to  a  natural  law  of  gravitation,  just  as 
water  is  ever  seeking  to  find  its  level.  Thus,  if 
the  demand  for  labor  is  brisk  in  one  line  of  em- 
ployment while  it  is  slack  in  others,  wages  will  tend 
to  rise  in  the  one  in  which  the  demand  is  most  i 
active,  but  the  increase  in  wages  will  at  once  at- 
tract new  laborers  from  other  trades  and  the  up- 
ward tendency  of  wages  will  be  checked;  or  if 
labor  be  less  plentiful  in  California  than  it  is  in 
New  York,  the  rates  of  wages  will  be  high  in  Cali- 
fornia and  there  will  be  a  steady  flow  of  laborers 


86  Combinations, 

into  that  state  until  the  rates  of  wages  have  been 
reduced  to  about  the  level  which  prevails  in  other 
states;  or  if  labor  be  scarce  in  America  and  j^len- 
tiful  in  Europe,  and  the  rates  of  wages  correspond- 
ingly higher  in  America,  there  will  be  a  steady 
stream  of  labor  flowing  westward  until  the  dif- 
ference in  the  conditions  of  the  labor  market  shall 
be  more  nearly  equalized.  We  have  witnessed  this 
movement  ever  since  the  settlement  of  the  country, 
accentuated  by  records  of  greatly  increased  immi- 
gration during  periods  of  unusual  prosperity  and 
high  wages.  It  is  this  great,  world  supply  of  labor 
and  the  demands  which  are  made  upon  it,  that 
must  always  control  the  price  of  labor,  which  we 
call  wages. 

On  account  of  the  various  economies  which  it 
is  possible  to  effect  in  large  scale  production,  there 
is  less  labor  required  to  produce  a  given  quantity 
of  any  monopolized  article,  and,  if  the  production 
of  all  commodities  were  controlled  by  monopolies, 
and  they  were  left  free  to  maintain  a  high  scale 
of  prices,  it  is  clear  that  there  would  be  nothing  to 
induce  an  increase  in  the  consumption  or  demand 
for  the  goods.  It  follows  that  the  amount  of  labor 
required  would  be  materially  diminished,  and  that 
the  decreased  demand  for  labor  would  certainly 
result  in  lowering  the  standard  of  wages ;  but 
monopolies  can  never  hope  to  control  the  entire 
field  of  production.  The  prices  fixed  by  combi- 
nations and  monopolies  from  which  they  propose  to 
reap  their  harvest,  will  usually  be  found  to  induce 
a  spontaneous  growth  of  small  competitors  in  the 
business,  which,  so  long  as  they  control  but  a  small 
percentage  of  the  trade,  may  be  deemed  to  be  too 


Trusts  and  Monopolies.  87 

trifling  to  deserve  serious  attention,  and  may  be 
allowed  to  pursue  their  course  without  molesta- 
tion; but  as  soon  as  they  begin  to  extend  their 
trade  beyond  these  limits  and  to  make  any  ap- 
preciable inroads  into  the  business  of  the  combi- 
nations, the  monopolists  will  at  once  set  upon  them 
and  exert  all  their  powers  to  recover  whatever  pres- 
tige has  been  lost,  and  may  pursue  the  offending 
rivals  even  to  the  point  of  extermination.  As  soon, 
however,  as  these  sources  of  annoyance  have  been 
suppressed  and  prices  have  been  restored  to  a  profit- 
yielding  level,  new  competitors  will  again  begin  to 
appear  to  repeat  the  history  of  their  predecessor. 

These  numerous  small  competitors  create  a  not 
inconsiderable  demand  for  labor;  the  wants  of 
mankind  are  so  numerous  and  varied  as  to  require 
the  ministration  of  an  almost  endless  variety  of 
services;  and  invention  and  discovery  are  con- 
stantly adding  to  the  list  of  items  of  production; 
so  it  seems  to  be  inevitable  that  there  must  always 
be  a  considerable  demand  for  labor  which  is  be- 
yond the  power  of  the  monopolies  to  control,  and 
all  these  independent  sources  of  employment  serve 
to  neutralize  the  effects  of  combination  and  mo- 
nopoly upon  the  labor  market. 

The  introduction  of  new  industries,  new  methods 
of  building,  and  new  modes  of  supplying  the  vari- 
ous requirements  of  society,  are  constantly  opening 
up  new  and  ever  widening  fields  for  the  employ- 
ment of  labor,  both  by  increasing  the  consumption 
and  demand  for  the  materials  used  in  their  con- 
struction, thus  increasing  the  demand  upon  the 
older  concerns  which  have  already  engaged  in  the 
production   and  manufacture  of  such  materials. 


\ 


88  Combinations, 

and  by  affording  permanent  employmeni  to  large 
numbers  of  persons  in  their  construction  and  oper- 
ation. 

The  introduction  of  electric  railways  not  only 
into  large  cities  and  their  immediate  suburbs, 
but  all  through  the  country  districts,  has  built  up 
a  business  of  enormous  proportions,  and  we  have 
much  reason  to  believe  that  it  is  yet  only  in  its 
infancy.  The  construction  of  roadways,  the  manu- 
facture of  rolling  stock  and  machinery,  the  erec- 
tion of  power  houses,  and  the  electric  equipment  of 
the  lines,  afford  employment  to  large  numbers  of 
persons  in  all  classes  of  labor  from  the  unskilled 
laborer  to  the  finest  mechanic,  and  the  operation 
of  the  roads  affords  permanent  employment  to 
many  more. 

The  introduction  of  iron  and  steel  construction 
into  the  erection  of  large  buildings  in  all  of  our 
important  cities,  the  replacing  of  wood  by  iron  and 
steel  in  the  building  of  vessels  of  all  classes  from 
the  small  lake  and  river  boats  to  the  great  ocean 
liners,  and  the  use  of  steel  cars  by  the  railways, 
have  revolutionized  these  industries  and  have  cre- 
ated a  new  and  increasing  demand  for  iron  and 
steel;  the  introduction  of  the  telephone  through- 
out the  country  districts  has  created  an  additional 
demand  for  linemen  and  for  the  manufactured 
instruments  and  equipments;  the  very  general 
construction  by  the  railroads  of  iron  and  steel 
structures  for  the  old  wooden  bridges  and  trestle 
work  with  which  they  were  formerly  content  to 
endanger  the  lives  and  property  of  their  patrons, 
and  the  growing  disposition  to  substitute  iron  and 
steel  for  more  perishable  materials  in  the  construe- 


Trusts  and  Monopolies.  89 

tion  and  manufacture  of  all  classes  of  work  and 
commodities,  afford  sources  of  employment  for 
labor  which  seem  to  absorb  it  as  rapidly  as  it  is 
displaced  by  combinations  in  other  directions.  If 
ihe  power  of  monopolies  to  maintain  unreasonably 
high  prices  can  be  restrained,  and  some  portion  of 
the  benefits  arising  from  the  improved  methods 
and  reduced  cost  of  production  can  be  secured  to 
the  public  in  the  form  of  reduced  prices,  the  de- 
velopment of  new  enterprises  will  be  greatly  en- 
couraged, the  consumption  of  more  durable  mate- 
rials and  the  demand  for  better  classes  of  goods 
will  be  greatly  increased,  and  the  demand  for  labor 
:will  expand  in  the  same  proportion.  Mr.  John  W. 
Gates,  chairman  of  the  American  Steel  and  Wire 
Company,  testifying  before  the  Industrial  Commis- 
sion in  1900,  said,  that  in  his  judgment  the  new 
output  of  steel  cars,  steel  vessels  and  steel  frames 
for  buildings  and  bridges  constituted  as  large  a 
tonnage  as  the  total  tonnage  of  the  United  States 
in  iron  and  steel  fifteen  or  twenty  years  ago,  and 
that  it  is  increasing  every  year. 

As  we  have  already  seen  in  another  chapter  the 
consolidation  of  several  independent  manufactur- 
ing establishments  into  one  is  usually  accompanied 
by  the  discharge  of  large  numbers  of  superintend- 
ents, foremen,  bookkeepers,  clerks,  salesmen,  me- 
chanics, laborers,  etc.  The  number  thus  displaced 
by  combination  has  doubtless  already  amounted  to 
many  thousands.  Mr.  Gates,  testifying  before  the 
Industrial  Commission  on  that  point,  says  that 
his  company  has  dispensed  with  about  two  hun- 
dred traveling  salesmen  and  about  fifty  per  cent, 
of  the  high  priced  men  such  as  presidents,  vice- 


90  Combinations, 

presidents,  secretaries,  treasurers,  auditors,  super- 
intendents, etc.  Combination  has  certainly  proved 
to  be  a  great  misfortune  to  most  of  these  men  and 
especially  to  the  traveling  men,  for  most  of  them 
had  received  large  salaries,  and  being  obliged  in 
a  measuixj  to  reflect  in  their  manner  of  living  the 
financial  prosperity  of  the  houses  represented  by 
them,  they  had  acquired  habits  of  extravagance 
•which  made  it  doubly  hard  for  them  to  conform 
their  expenses  to  the  reduced  salaries  which  many 
of  them  have  been  obliged  to  accept  in  other  em- 
ployments to  which  they  have  been  driven  by  the 
rapid  extension  of  combination  from  one  branch 
of  business  to  another.  The  woes  of  the  traveling 
salesmen  have  been  echoed  by  the  hotel  keepers  in 
every  little  town  throughout  the  country  who  once 
numbered  them  among  their  most  regular  guests, 
and  even  the  railroads  miss  the  large  revenues 
which  had  annually  been  derived  from  the  tens 
of  thousands  of  traveling  men  who  have  been  dis- 
placed. 

Mr.  Edson  Bradley,  President  of  the  American 
Spirits  Manufacturing  Company  and  Vice-Presi- 
dent of  the  Distilling  Company  of  America,  testi- 
fied before  the  Industrial  Commission  that  the 
whiskey  combinations  had  dispensed  with  the 
services  of  three  hundred  traveling  salesmen.  As 
we  have  already  seen,  Mr.  Gates  testified  that  the 
American  Steel  and  Wire  Company  had  dispensed 
with  about  two  hundred  traveling  salesmen,  and 
Mr.  A.  S.  W.  Roth,  Publisher  of  the  Retailers 
Journal,  Chicago,  and  Secretary  of  the  Cook 
County  Retail  Dealers  Association,  testified  before 
the  same  commission  as  follows:     "The  tobacco 


Trusts  and  Monopolies.  gi 

trust  discharged  five  thousand  traveling  men  in  one  i 
day,  and  the  spool  and  cotton  trust  also  discharged  - 
all  the  salesmen.  The  trust  throws  thousands  of 
people  out  of  work,  and  the  goods  are  no  cheaper 
than  before."  Mr.  P.  E.  Dowe,  President  of  the 
Commercial  Travelers'  National  League,  presented 
the  following  estimate  to  the  Industrial  Commis- 
sion in  June,  1899:  '^From  the  figures  supplied 
me  by  commercial  men,  I  submit  the  following, — 
more  than  thirty-five  thousand  salesmen  have  been 
thrown  out  of  work  through  the  organisation  of 
trusts  and  twenty-five  thousand  reduced  in  salary, 
eome  being  retained  at  a  big  cut  in  compensation 
in  house  positions,  others  as  traveling  agents — sixty 
thousand  salesmen  directly  affected  by  trusts.  .  .  . 
We  will  now  consider  the  effect  of  thirty-five  thou- 
sand commercial  men  out  of  work  and  twenty- 
five  thousand  at  two-thirds  their  previous  salary, 
assuming  that  twelve  thousand  five  hundred  of  the 
twenty-five  thousand  still  act  as  travelers.  One 
hundred  fifteen  million  dollars  represents  the  an- 
nual expenditures  cut  off  by  the  direct  influence 
of  trusts,  as  follows :  sixty  million  loss  in  salaries ; 
twenty-seven  million  dollars  for  railroad  tickets, 
sleeping  ears,  and  excess  baggage,  an  amount  equal 
to  the  entire  surplus  earnings  of  all  the  railroads 
of  the  country  for  1898.  The  loss  to  hotels  can 
safely  be  estimated  at  twenty-eight  million  dol- 
lars.'' The  bookkeepers,  foremen,  superintend- 
ents, etc.,  who  have  been  displaced  have  been 
obliged  to  seek  elsewhere  for  similar  employment 
and  perhaps  in  most  cases  to  adapt  themselves  to 
other  classes  of  duties,  and  the  mechanics  and 


92  Combinations, 

laborers  have  had  to  find  new  employment  in  other 
lines  of  trade. 

What,  then,  has  been  the  effect  upon  labor  of 
this  displacement  of  employees?  The  throwing  of 
BO  great  a  number  of  persons  out  of  employment 
within  so  short  a  time  would  certainly  produce  a 
noticeable  increase  in  the  supply  of  labor-seeking 
employment,  and  could  not  fail  to  be  reflected  in 
the  lower  wages,  if  their  labor  were  not  immedi- 
ately absorbed  by  other  employments.  There  has 
not  been  any  appreciable  increase  of  unemployed 
labor  during  the  last  four  or  five  years,  but  on  the 
contrary  employment  has  been  more  general  than 
for  several  years  preceding;  and  wages  have  not 
been  reduced  but  in  many  instances  have  been 
raised.  Thus,  we  fail  to  discover  either  of  the 
two  general  manifestations  of  the  evil  effect  which 
combinations  might  be  expected  to  exert  upon 
labor.  Mr.  Jenks  thus  summarizes  his  analysis  of 
the  tables  presenting  the  report  made  by  combina- 
tions to  the  Bureau  of  Labor,  in  response  to  ques- 
tions as  to  their  number  of  employees  and  the 
wages  paid,  published  in  the  Bulletin  of  the  De- 
partment of  Labor,  No.  29,  July,  1900. 

"This  table  shows,  too,  that  in  a  majority  of 
cases  there  has  been  an  increase  all  along  the  line, 
both  in  the  number  of  employees  and  in  the  total 
wages.  Without  entering  into  the  details  regard- 
ing the  various  classes  of  labor,  it  will  be  perhaps 
worth  noting  that  taking  all  the  employees  together, 
there  has  been  but  two  cases  of  a  decrease  in  the 
number  of  employees,  out  of  thirteen  reporting, 
and  but  one  case,  out  of  the  same  number,  in  the 
decrease  in  the  total  annual  wages.     This  table 


Trusts  and  Monopolies.  93 

seems  also  to  show  that  the  percentage  of  increase 
in  wages  had  been  more  than  that  of  the  increase 
in  the  number  of  men,  thus  confirming  again  the 
statements  as  to  the  general  average  increase  of 
wages."  And  of  the  next  table,  he  says:  "For 
the  combinations  reporting,  this  table  shows  an 
increase  in  the  average  annual  wages  paid  to 
skilled  laborers,  to  unskilled  laborers,  and  to  clerks, 
and  a  decrease  in  the  annual  wages  paid  to  super- 
intendents, and  foremen,  traveling  salesmen,  and 
the  unclassified  employees.  Taking  all  of  the  em- 
ployees together,  the  percentage  of  increase  of 
average  annual  wages  has  been  twelve  and  sixty-one 
hundredths.  The  greatest  increase  has  appeared  in 
the  case  of  unskilled  laborers,  the  greatest  percent- 
age of  decrease  in  the  unclassified  employees,  while 
traveling  salesmen  have  lost  much  more  in  average 
wages  than  have  superintendents  or  foremen,  the 
figures  being  respectively  seven  and  forty-three 
hundredths  and  two  and  seventy-seven  hundredths. 
In  all  cases  of  employees,  taking  all  of  the  estab- 
lishments which  have  reported,  there  has  been  a 
decided  increase  in  the  number  of  employees ;  and 
in  all  cases,  with  the  exception  of  the  traveling 
salesmen,  there  has  been  also  an  increase  in  the 
total  amount  of  wages  paid.  The  traveling  sales- 
men have  received  less  by  three  and  fifty-seven 
hundredths  per  cent." 

Mr.  Jenks  calls  particular  attention  to  the  dan- 
ger of  attempting  to  draw  definite  conclusions  from 
the  tables  in  the  Bulletin,  the  number  of  combina- 
tions reporting  being  so  small.  They  had  been  so 
Tery  recently  organized,  and  at  a  time  when  chang- 
ing business  conditions  affected  prices,  wages,  and 


94  Combinations, 

employment,  in  all  classes  of  business,  whether 
conducted  by  private  establishments  or  by  combi- 
nations, that  it  is  almost  impossible  to  say  what 
portion  of  the  change  was  due  to  the  effect  of  com- 
bination. His  general  conclusion  from  the  tables 
appears  to  be  that  it  was  then  too  early  to  deter- 
mine what  really  was  the  effect  of  combination 
upon  wages  and  labor,  and  that  while  the  figures 
appear  to  show  that  combinations  had  paid  more 
wages,  it  was  not  safe  to  assume  that  the  ultimate 
effect  of  combinations  would  be  to  increase  wages. 
AVe  believe,  however,  that  the  fact  that  combina- 
tions had  paid  higher  wages  is  sufficient  to  show 
that  the  number  of  unemployed  has  not  been  in- 
creased and  the  wages  have  not  been  reduced. 

Tlie  first  effect  of  combination  upon  labor  ap- 
pears to  have  been  to  cause  sometliing  of  a  repeti- 
tion of  the  disturbances  produced  in  the  early  sev- 
enties by  the  introduction  of  the  self-binding  mow- 
ing machine  among  the  farmers.  Thousands  of 
men  throughout  the  country  had  been  accustomed 
for  years  to  secure  steady  employment  at  high  rates 
of  wages  during  harvest  time,  and  now  suddenly 
by  the  introduction  of  these  new  machines,  they 
found  themselves  thrown  out  of  employment.  They 
banded  together  in  large  numbers  and  marched 
through  the  country  burning  and  destroying  prop- 
erty on  all  sides  in  revenge  for  the  wrong  which 
they  fancied  had  been  done  them.  But,  as  soon 
as  the  panic  which  was  just  then  paralyzing  busi- 
ness of  all  kinds,  began  to  disappear  and  the  wheels 
of  commerce  began  to  turn  again,  this  army  of  the 
unemployed  was  speedily  absorbed  by  the  general 


Trusts  and  Monopolies.  95 

demands  of  trade,  and  the  use  of  the  self  binders 
has  ever  since  gone  on  without  a  protest. 

The  only  difference  in  the  situation  appears  to 
be  that  at  the  time  of  the  introduction  of  the  labor 
saving  self  binders,  the  country  was  in  the  throes 
of  a  panic  and  all  the  avenues  of  employment  were 
blockaded,  while  at  the  time  of  the  introduction  of 
labor  saving  combination  the  country  was  just  re- 
covering from  the  effects  of  a  panic,  and  the  de- 
mand for  labor  was  increasing  in  all  directions. 
Temporary  hardships  have  doubtless  been  caused 
to  many  individuals  by  the  formation  of  these  large 
industrial  combinations,  but  they  seem  to  promise 
more  steady  and  regular  employment  both  to  capi- 
tal and  to  labor. 

From  what  has  already  been  said,  it" appears  that 
notwithstanding  the  power  of  monopolies  to  con- 
trol production,  their  ability  to  conduct  business 
with  less  labor  per  unit  of  production,  and  the  dis- 
charge of  large  numbers  of  employees  in  conse- 
quence of  the  consolidation  of  competing  concerns, 
monopolies  have  as  yet  exercised  no  perceptible  in- 
fluence upon  wages. 

The  increasing  demands  of  new  enterprises,  and 
the  increased  consumption  of  the  products  con- 
trolled by  monopolies,  have  served  to  neutralise  the 
natural  tendency  of  monopoly  in  production — 
"which  is  to  depress  wages;  and  we  believe  that, 
with  the  aid  of  judicious  legislation  to  restrain  the 
abusive  exercise  of  the  powers  acquired  by  these 
monopolistic  corporations,  these  same  influences 
will  continue  to  secure  for  labor,  at  least  as  fair 
a  rate  of  compensation  as  it  had  received  under  the 
old  system  of  production. 


96  Combinations, 

There  are  those  who  tell  us,  with  much  pretended 
show  of  public  spirit,  that  the  organization  of 
large  monopolistic  corporations  enables  them  to  pay 
higher  wages  to  their  employees,  and  to  make 
lower  prices  to  the  consumers ;  and  seek  to  convey 
the  impression  that  such  are  the  purposes  of  the  or- 
ganizations. But  this  is  the  merest  hypocrisy.  The 
purpose  of  the  organizations  is  selfish  gain,  and 
if  it  becomes  necessary  to  increase  wages  or  lower 
prices  in  order  to  increase  that  gain,  they  will  do 
so — but  not  otherwise.  Profit  is  the  object,  and 
higher  wages  and  lower  prices  are  merely  the  in- 
cidents which  they  may  be  obliged  to  concede  in. 
order  that  their  own  profits  may  be  increased.  No 
body  of  men  is  going  to  band  itself  together  and 
expend  its  money,  time,  and  energy,  merely  to  raise 
the  wages  of  labor,  or  to  afford  lower  prices  to  con- 
sumers; it  is  contrary  to  the  instincts  of  human 
nature  and  to  human  experience,  and  no  one  will 
be  deceived  by  such  shallow  pretenses.  These 
large  corporations  are  mere  business  agents,  for 
business  purposes  only,  but  as  such  they  have  come 
to  stay. 

The  new  industrial  organization  is  as  much  of  a 
labor  saving  machine  in  the  management  and  con- 
trol of  production  as  was  the  machine  for  the  cut- 
ting of  grain,  the  saw  mill,  or  the  lathe,  and  we 
can  no  more  retreat  from  the  use  of  the  one  than 
of  the  other.  It  is  doubtless  true  that  many  of  the 
monopolistic  organizations  of  to-day  are  in  a  sense 
experimental,  that  much  difficulty  will  yet  be  ex- 
perienced on  account  of  over  capitalization,  over 
valuation,  reckless  management,  speculation,  and 
worst  of  all,  the  desire  of  the  professional  promoter 


X 


Trusts  and  Monopolies*  97^ 

to  reap  large  profits  for  himself  regardless  of  the 
fate  of  the  organization;  and  that  they  will  have 
to  undergo  various  processes  of  reorganization  such 
as  many  of  them  have  already  passed  through; 
but  these  will  be  merely  alterations  in  the  title 
and  will  have  but  little  effect  upon  the  operation 
of  the  plants.  The  various  elements  of  any  dis- 
tinct line  of  business,  which  have  been  brought  to- 
gether into  a  combination,  are  not  likely  ever  again 
to  become  severed.  This  we  believe  to  be  true  of 
such  combinations  as  the  American  Sugar  Refining 
Company,  the  Standard  Oil  Company,  etc.,  but 
with  such  as  the  United  States  Steel  Corporation, 
the  Anthracite  Coal  Combination,  etc.,  in  which) 
transportation  and  perhaps  other  distinct  indus-^ 
tries  are  joined  with  manufacture,  mining,  etc.,  wej 
believe  that  there  should,  and  will  be  a  severing  of  i 
these  several  interests.  y 

In  addition  to  the  changes  of  ownership  and 
control  of  these  corporations  caused  by  reorgani- 
zation, foreclosure,  etc.,  there  will  also  be  a  change 
of  title  constantly  going  on  in  the  form  of  sales  of 
stock,  but  neither  mode  of  change  will  have  any 
immediate  effect  upon  the  business  of  the  concern. 
It  will  continue  to  go  on  regardless  to  whom  the 
profits  may  go,  just  as  in  the  case  of  a  railroad 
company,  no  matter  how  often  the  stock  may  be 
sold,  or  how  completely  the  board  of  directors  may 
be  changed,  the  trains  run  every  day  just  the  same. 
These  changes  in  the  ownership  of  the  stock  will, 
however,  have  but  little  or  no  effect  upon  the  re- 
lations between  the  corporations  and  labor.  The 
interests  and  purposes  are  the  same,  and  it  makes 
no  difference  to  the  employee  whether  the  stock  of 


98  Combinations, 

the  corporation  is  held  by  twenty  persons  or  by 
twenty  thousand  persons,  and  it  is  a  matter  of 
equal  indifference  whether  the  stock  be  held  by 
laboring  men,  business  men  of  small  means,  or  by 
millionaires.  All  are  equally  anxious  to  secure 
their  dividends. 

After  these  large  industrial  corporations  shall 
have  passed  through  the  process  of  reorganization  a 
sufficient  number  of  times  to  have  squeezed  out  all 
the  watered  stock,  and  reduced  their  capitalization 
to  something  like  the  cost  of  duplication,  and  shall 
pay  their  dividends,  be  they  large  or  small,  only 
upon  stock  which  represents  real  value  in  the  busi- 
ness, then  they  will  begin  to  assume  the  position  of 
permanent  institutions  and  afford  safe  and  remu- 
nerative opportunities  for  investment  by  people 
j"who  have  neither  the  time  nor  the  opportunity  to 
follow  the  various  manipulations  of  the  stock  mar- 
ket which  engage  the  attention  of  the  stock  ex- 
changes, and  who,  therefore,  cannot  trust  the  stocks 
of  the  industrial  corporations  of  to-day.  The  large 
blocks  of  stock  now  held  by  single  individuals 
will  gradually  become  scattered  until  in  time  the 
share  holders  of  many  of  the  large  business  cor- 
porations may  be  numbered  by  the  thousands,  as  is 
already  the  case  with  our  great  railroad  systems. 

Having  thus  noted  the  effects  of  combination 
and  monopoly  upon  productioii,  prices,  wages,  and 
labor,  let  us  now  inquire  a  little  as  to  their  effects 
upon  the  employers.  The  importance  of  this 
branch  of  our  subject  is  not  to  be  estimated  merely 
by  the  number  of  persons  who  are  directly  affected, 
for  their  position  as  leaders  of  business,  their  repu- 
tation for  shrewdness  and  sound  judgment,  and 


Trusts  and  Monopolies.  99 

their  experience  in  the  employment  and  direction 
lof  men,  have  served  to  secure  to  them  a  sort  of 
natural  leadership  in  the  social  and  political  aftairs 
of  the  community,  and  whatever  effects  their  con- 
dition will  have  a  much  greater  influence  upon 
society  at  large  than  that  which  concerns  only  an 
equal  number  of  persons  in  private  life.  Any 
serious  disturbance  of  the  condition  of  those  whom 
we  have  learned  to  look  upon  as  the  bulwarks  of 
society  and  the  leaders  in  progress  and  civilization 
must  always  be  attended  by  a  more  or  less  general 
disarrangement  of  the  affairs  of  society.  The  dis- 
comfiture of  the  leaders  is  certain  to  produce  a 
sort  of  panic  among  the  people.  They  pause  in 
suspense,  holding  their  breath,  as  it  were,  and  hold- 
ing fast  to  their  purse  strings  at  the  same  time; 
they  become  suspicious  of  the  outcome  of  every 
new  enterprise,  and  a  general  feeling  of  uncer- 
tainty and  distrust  prevails. 

A  repetition  of  such  disturbances  would,  there- 
fore, on  first  thought  appear  to  be  a  most  deplora- 
ble misfortune ;  but  such  has  ever  been  the  history 
of  progress  and  civilization.  The  old  forms  must 
ever  give  way  to  the  new,  and  the  loftiest  columns 
have  the  longest  distance  to  fall. 

The  early  manufacturers  who  employed  a  few 
mechanics  to  work  at  hand  labor  in  their  shops, 
were  men  of  influence  and  importance  among  the 
people  of  their  day ;  but  the  introduction  of  steam 
power  left  their  mode  of  manufacture  behind  the 
age  and  they  were  obliged  to  adopt  the  new  sys- 
tem, or,  if  they  could  not  afford  to  conduct  busi- 
ness on  a  sufficiently  large  scale  to  employ  steam 
power,  to  go  out  of  business.    The  result  was  that 


lOO  Combinations, 

many  were  obliged  to  give  up  business  and  to  seek 
employment  for  themselves  in  the  larger  factories 
which  had  supplanted  them. 

The  development  of  steam  power  soon  led  to  the 
introduction  of  larger  and  more  expensive  ma- 
chinery, and  the  smaller  concerns,  in  many  in- 
stances, found  it  necessary  to  unite  either  with 
others  engaged  in  the  same  business,  or  with  out- 
side parties  who  were  willing  to  put  their  capital 
into  the  business,  and  to  enter  partnership  with 
them.  Thus  was  joint  ownership  gradually  sub- 
stituted for  individual  ownership. 

The  growth  of  commerce  and  the  increasing  de- 
mands of  trade  soon  began  to  overtax  the  capacity 
of  partnership  management,  and  corporations  be- 
gan to  supersede  the  smaller  firms,  and  individual 
concerns  then  engaged  in  tlie  business  of  manu- 
facture. 

The  advantages  of  large  scale  production  began 
to  be  recognized,  many  modes  of  combination  were 
devised  and  experimented  with,  and  the  numerous 
corporations  which  had  before  so  mercilessly  ab- 
sorbed  the  partnership   and  individual   concerns 
which  had  preceded  them,  began  to  merge  into  a 
few  great  corporations,  each  of  which  was  designed 
to  control  its  particular  line  of  industry. 
i\     Such  have  been  the  successive  steps  in  the  de- 
/  Welopment  of  our  industrial  system,  and  the  billion 
/    aollar  United  States  Steel  Corporation  is  merely 
the  natural  outgrowth  of  the  evolution  which  has 
been  going  on  among  our  industrial  and  commer- 
cial institutions  for  the  last  hundred  years. 

The  employers  of  recent  years  include  corpora- 
tion as  well  as  the  individual  proprietors  and  the 


Trusts  and  Monopolies.  loi 

members  of  partnership  concern;  and  the  forma- 
tion of  large  monopoly  corporations  has  undoubt- 
edly driven  many  of  them  out  of  business.  The 
smaller  concerns  have  usually  been  obliged  to  sell 
out  or  be  forced  out  of  business  by  the  great  corpo- 
rations, but  the  larger  ones  have  frequently  been 
able  to  secure  the  retention  of  many  of  their  officials 
in  connection  with  the  business  of  the  monopoly. 
The  number  of  those  high  officials  who  have  been 
thus  fortunate  in  being  retained  by  the  combina- 
tions in  employment  of  any  kind,  was  estimated 
by  Mr.  John  W.  Gates,  in  his  testimony  before  the 
Industrial  Commission,  to  have  been  fifty  per  cent, 
in  the  cases  of  the  companies  which  have  been  ab- 
sorbed by  the  American  Steel  and  Wire  Company. 
If,  then,  fifty  per  cent,  of  the  officials  of  corpora- 
tions which  have  become  parties  to  the  combina- 
tion, and  a  presumably  much  larger  percentage  of 
the  individual  proprietors  and  smaller  corporations 
engaged  in  the  business  directly  affected  by  it,  have 
been  thrown  out  of  business  through  the  operation 
of  combination,  it  is  easy  to  believe  that  the  num- 
ber of  persons  directly  affected  has  been  very  con- 
siderable. 

We  have  already  remarked  that  this  displace- 
ment of  employers  by  the  continual  change  in  the 
size  and  form  of  organization  of  the  business  con- 
cerns has  been  going  on  for  generations,  but  a 
more  definite  idea  of  the  extent  to  which  it  has  al- 
ways attained,  may  be  derived  from  a  moment's  in- 
spection of  some  of  the  statistics  presented  in  the 
Twelfth  Census. 

In  Volume  Seven  of  the  Twelfth  Census  of  the 
.United  States,  1900,  Manufactures,  Part  One,  the 


I02  Combinations, 

Director  of  the  Census  summarizes  the  develop- 
ment of  the  factor}'  system  in  the  United  States 
as  follows:  "The  factory  system  of  manufacture, 
so  called  in  contrast  to  domestic  and  shop  manu- 
facture, had  practically  no  existence  in  the  United 
States  at  the  opening  of  the  nineteenth  century, 
although  its  development  in  England,  particularly 
in  the  textile  industries,  had  been  rapid  during 
the  last  quarter  of  the  eighteenth  century.  .  .  . 
It  was  not  until  about  1840  that  the  factory  method 
of  manufacture  extended  itself  widely  to  miscella- 
neous industries,  and  began  to  force  from  the  mar- 
ket the  hand-made  products  with  which  every  com- 
munity had  hitherto  supplied  itself.  It  seems 
probable  that  until  about  the  year  1850,  the  bulk 
of  general  manufacturing  done  in  the  United 
States  was  carried  on  in  the  shop  and  the  house- 
hold, by  the  labor  of  the  family  or  individual  pro- 
prietors with  apprentice  assistance,  as  contrasted 
with  the  present  system  of  factory  labor,  compen- 
sated by  wages,  and  assisted  by  power.  Since  that 
date,  the  relative  value  of  the  manufactured  prod- 
ucts of  the  shop  and  the  household  have  steadily 
decreased,  until  at  the  Twelfth  Census,  it  repre- 
sents but  an  insignificant  part,  say  one  thirteenth, 
of  the  total  value  of  products.^' 

In  the  same  volume  of  the  Census,  the  total 
number  of  establishments  engaged  in  manufactur-- 
ing  and  mechanical  industries,  is  given  as  512,- 
254  which  produced  goods  valued  at  $13,004,400,- 
143 ;  of  these  372,703  were  owned  and  operated  by 
individual  proprietors,  and  produced  an  average 
of  $7,176  worth  of  products  each;  96,715  were 
owned     and     operated     by     partnerships,     and 


Trusts  and  Monopolies.  103 

produced  an  average  of  $26,524  worth  of  products 
each ;  and  40,743  were  owned  and  operated  by  cor- 
porations, with  an  average  production  of  $189,- 
813  for  each  establishment.  Thus  we  see  that  at 
the  same  average  capacity  as  that  of  the  establish- 
ments owned  by  individual  proprietors  in  the  year 
1900,  it  would  have  required  1,812,207  individual 
establishments  to  equal  the  production  of  the  year 
1900,  which  was  produced  by  512,254  establish- 
ments; and  that  the  introduction  of  the  various 
forms  of  joint  proprietorship  has  already  reduced 
the  number  of  establishments  1,299,953,  or  seventy- 
one  and  seventy-three  hundredths  per  cent,  below 
what  it  would  have  been  under  individual  owner- 
ship, and  that  apparently  that  number  of  pro- 
prietors has  already  been  displaced. 

It  appears,  then,  that  this  displacement  of  em- 
ployers has  been  a  feature  of  the  industrial  his- 
tory of  our  country  ever  since  its  earliest  days, 
and  that  a  relative  reduction  in  the  number  and 
increase  in  the  size  of  the  establishments  have 
attended  every  step  in  the  development  of  our  in- 
dustrial system.  We  must  not,  therefore,  be  too 
hasty  in  assuming  that  the  displacement  of  em- 
ployers by  the  great  corporations  of  to-day  is  neces- 
sarily an  unmixed  evil.  It  may  be  that  the  rush 
to  combination  has  been  too  impetuous,  and  that 
it  has  found  us  unprepared  to  meet  the  new  prob- 
lems and  conditions  presented  by  it;  but  it  is 
merely  a  sudden  expansion  of  the  ordinary  busi- 
ness corporation  with  which  we  have  all  become 
familiar,  and  we  must  adjust  our  laws  to  meet 
the  requirements  of  the  new  conditions,  just  as 
we  have  been  obliged  to  meet  the  ever  changing 


I04  Combinations, 

conditions  caused  by  the  development  of  our  meth- 
ods of  transportation,  from  the  stage  coach  upon 
the  country  road  to  the  drawing-room  car  on  a 
limited  express  train.  Every  unnecessary  person, 
be  he  employer  or  employee,  who  is  eliminated 
from  the  process  of  manufacture,  is  a  distinct  item 
of  economy  in  production;  but  it  is  our  duty  to 
see  that  a  fair  share  of  the  benefit  of  that  economy 
is  secured  to  the  people,  and  that  it  is  not  all 
diverted  to  swell  private  profits. 

Having  now  examined  some  of  the  more  impor- 
tant points  in  which  combinations  and  monopolies 
directly  affect  the  welfare  of  the  people,  let  us 
for  a  moment,  in  conclusion,  inquire  into  their 
effects  upon  the  government  itself.  When  our  in- 
dustries were  in  their  infancy  and  consisted  of  a 
large  number  of  small  institutions  widely  scat- 
tered throughout  the  country  and  owned  by  numer- 
ous private  individuals,  there  were  no  lobbies  in 
constant  attendance  at  our  legislative  halls  seek- 
ing to  secure  the  passage  of  measures  or  to  obtain 
special  privileges;  the  manufacturing  business  was 
merely  a  portion  of  the  general  interests  of  the 
people,  and  no  one  thought  of  its  ever  exercising 
any  undue  influence  in  tlie  affairs  of  the  govern- 
ment. National  elections  were  conducted  with 
small  campaign  funds,  and  no  class  of  individuals 
felt  called  upon  to  contribute  large  sums  of  money 
to  secure  the  election  of  an  administration  which 
would  give  to  them  no  greater  protection  or  bene- 
fit than  was  guaranteed  to  every  other  citizen. 
But  as  concentration  progressed  and  great  insti- 
tutions replaced  numerous  smaller  ones,  lobbies 
began  to  appear  at  the  seats  of  government  to  labor 


Trusts  and  Monopolies.  105 

for  the  enactment  of  legislation  in  the  interests 
of  private  enterprises.  With  the  appearance  of 
trusts  and  combinations,  these  lobbies  became 
greatly  increased,  and  emissaries  of  special  interest 
became  permanent  features  of  every  legislative 
assembly.  The  manufacturing  interests  were  no 
longer  a  mere  part  of  the  general  concern  of  the 
nation,  which  might  be  properly  cared  for  by  the 
regularly  elected  representatives  of  the  people,  but 
special  delegations  were  required  to  be  kept  in 
readiness  to  protect  them.  The  people  were  content 
to  entrust  the  protection  of  their  rights  to  the  regu- 
larly constituted  officers  who  were  chosen  for  that 
purpose,  but  the  trusts,  although  their  members 
had  an  equal  choice  in  the  selection  of  these 
representatives,  found  it  necessary  to  employ  spe- 
cial attorneys  to  keep  a  constant  watch  upon  them, 
and  to  use  every  practicable  means  to  secure  the 
enactment  of  laws  especially  favorable  to  the  in- 
dustries in  which  they  were  engaged,  and  for  this 
purpose  money  in  almost  unlimited  quantities  was 
provided.  Political  campaigns  were  no  longer  con- 
ducted upon  economical  lines,  but  large  contribu- 
tions were  regularly  made  by  the  trusts  and  other 
large  industrial  institutions,  and  the  political  par- 
ties have  learned  to  rely  upon  them  to  meet  the 
expense  ■  of  campaigns  in  which  money  was  to  be 
used  with  a  free  hand,  and  also  to  levy  assessments 
against  them  for  that  purpose.  Mr.  Havemeyer, 
President  of  the  American  Sugar  Eefining  Com- 
pany, testified  before  the  Congressional  investi- 
gating committee  that  it  was  the  practice  of  the 
Sugar  Trust  to  contribute  to  the  campaign  funds 
of  both  political  parties,  always  endeavoring  to 


io6  Combinations, 

keep  in  favor  with  the  party  which  was  then  in 
power.  But  these  trusts  do  not  thus  liberally  con- 
tribute to  campaign  funds  unless  they  find  iii 
profitable  to  do  so,  and  we  find  the  interests  of 
the  Sugar  Trust  cared  for  in  every  tariff  bill  which 
has  been  passed  by  Congress  since  the  organization 
of  that  trust.  If  the  sugar  trusts  have  found  it 
profitable  to  contribute  large  sums  of  money  to 
help  pay  campaign  expenses  of  political  parties  in 
return  for  favors  received  from  the  government,  it 
is  altogether  likely  that  the  numerous  combina- 
tions which  have  been  recently  formed  will  also 
find  it  to  their  interests  to  do  the  same;  and  since 
these  contributions  are  likely  to  be  in  some  meas- 
ure proportionate  to  the  ability  of  the  concerns  to 
pay,  it  is  to  be  supposed  that  the  influence  of  such 
combinations  as  the  United  States  Steel  Cor- 
poration, the  capitalization  of  which  is  eighteen 
or  twenty  times  that  of  the  Sugar  Trust,  will  be 
very  great  with  any  political  party  to  which  it  may 
lend  its  support.  With  the  political  parties  thus 
dependent  upon  trusts  and  combinations  for  their 
financial  support,  which  they  are  expected  to  repay 
with  the  choicest  favors  that  the  government  is 
able  to  bestow,  it  seems  probable  that  there  will 
soon  be  but  small  favors  left  for  the  people,  and 
that  unless  great  care  is  speedily  exercised  in  re- 
straining the  influence  of  combinations  and  monop- 
olies, they  will  before  long  be  dropped  entirely 
out  of  the  consideration  of  the  law-makers. 


Trusts  and  Monopolies.  107 


CHAPTER  VI. 

GROWTH   OF   COMBIN-ATIONS. 

Havin'g  now  examined  the  purpose  and  con- 
siderations which  led  to  the  formation  of  combina- 
tions, the  various  forms  of  organization  adopted, 
and  the  varied  powers  which  may  be  exercised 
by  them  after  they  have  been  organized,  let  U3 
inquire  a  little  as  to  what  progress  has  been  made 
in  the  development  of  combinations  and  ascertain, 
to  what  degree  of  importance  the  movement  has 
attained  in  the  business  world,  so  that  we  may 
be  better  able  to  determine  the  nature  of  the 
remedies  or  restrictions  which  should  be  applied 
to  it. 

The  acquisition  by  a  few  of  a  monopoly  of  the 
production  or  distribution  of  certain  commodities, 
is  an  evil  which  is  not  peculiar  to  our  day  but 
which  has  appeared  to  oppress  and  exasperate  the 
people  at  various  times  all  through  the  history  of 
civilization.     The  movement  toward  concentration 
and  combination,  however,  which  in  its  full  de- 
velopment affords  the  most  powerful,  most  endur-J 
ing,  and  most  effective  form  of  monopoly,  cannot^ 
be  said  to  have  fairly  begun  until  about  the  close  ji 
of  the  eighteenth  century,  when  the  factory  sys- 
tem of  manufacturing  first  began  to  supplant  the 
shop  and  fireside  method  of  production  which  had 


!io8  Combinations, 

fiupplied  the  wants  of  the  people  up  to  that  time. 
The  introduction  into  this  country  of  the  fac- 
.  tory,  or  collective,  as  opposed  to  the  individual, 
\  method  of  production,  proceeded  very  slowly  until 
''Kbont  the  year  18^     But  since  that  time  it  has 
developed  with  great  rapidity,  steadily  increasing 
the  number,  size  and  capacity  of  the  establish- 
ments until  we  to-day  find  whole  communities  em- 
ployed  in   one   great   factory,   and    the   tendency 
toward  the  establishment  of  large  manufacturing 
institutions,  rather  than  a  great  number  of  smaller 
ones,  has  been  so  pronounced  that,  while  the  prod- 
ucts of  manufactures  have  increased  many  times 
more  rapidly  than  the  population,  the  number  of 
establishments  has  relatively  diminished,  and  in 
some  lines  of  industry  there  has  been,  in  recent 
years,  an  actual  decrease  in  the  number  of  estab- 
lishments engaged  in  business. 
^     The  figures  presented  by  the  Director  of  the 
Census  may  serve  to  impress  this  phase  of  factory 
Idevelopment  more  forcibly  upon  the  reader,  and 
we  therefore  present  the  following  extract  from 
Volume  YII.  of  the  Twelfth  Census  of  the  United 
States,  p.  72: 

"The  Census  figures  throw  some  light  upon  the 
tendency  in  certain  industries  toward  concentra- 
tion into  large  establishments.  The  industries  in 
which  this  tendency  is  most  striking  are  presented 
in  Table  XVII. 

"This  method  of  presentation  by  averages, 
•which  includes  all  the  small  establishments  with 
the  great  ones,  fails  to  give  any  true  conception  of 
the  extent  to  which  the  total  value  of  the  product 
ijomes  from  a  comparatively  small  number  of  es- 


Trusts  and  Monopolies.  109 

tablishments,  the  operatives  of  which  are  numbered 
by  the  thousand. 

^The  tendency  toward  concentration  appears  to 
be  most  marked  in  the  iron  and  steel  industry. 
The  largest  number  of  rolling  mills  and  blast  fur- 
naces was  reported  at  the  Census  of  1870,  when 
726  establishments  reported  an  average  capi- 
tal of  $161,523,  103  wage-earners,  $54,158 
paid  in  wages,  $274,878  worth  of  products. 
At  the  Census  of  1880  the  number  of  es- 
tablishments decreased  to  699,  at  which 
point  it  stood  again  in  the  Census  of  1890, 
falling  still  further  to  668  in  1900.  At  the 
Twelfth  Census  these  668  establishments  reported 
an  average  capital  of  $858,371,  333  wage-earners, 
$180,869  paid  in  wages,  and  $1,203,545  worth  of 
products.  During  the  last  decade  the  average  cap- 
ital increased  45.2  per  cent,  and  the  average  prod- 
ucts 76.2  per  cent.  During  the  last  half  century 
the  average  iron  and  steel  establishment  had  in- 
'Creased  its  capital  eighteen  fold,  the  number  of 
"wage-earners  fivefold,  the  amount  paid  in  wages 
twelvefold,  and  the  value  of  the  product  twenty- 
sevenfold. 

"The  manufacture  of  agricultural  implements 
also  shows  a  consistent  decrease  in  the  number  of 
establishments  since  1860,  while  the  average  size 
of  the  establishments  has  increased  uninterruptedly 
since  the  first  report.  The  glass  industry  shows 
s.  continuous  increase  in  the  size  of  establishments, 
with  a  general  increase  in  their  number.  Leather 
and  paper  mills  have  about  kept  pace  with  each 
other  in  the  rate  of  increase  in  the  value  of  their 
products,  but  the  amount  of  capital  and  the  num* 


no  Combinations, 

ber  of  employees  in  the  paper  mills  are  greater 
than  in  the  leather  factories.  The  number  of 
paper  establishments  has  just  held  its  own,  while 
the  number  of  leather  establishments  has  actually 
decreased. 

"The  size  of  textile  establishments  is  notably 
larger  than  formerly.  The  number  of  establish- 
ments in  carpets  and  woolen  goods  are  somewhat 
less  than  during  the  earlier  periods;  in  cotton 
goods  there  was  little  difference  between  the  num- 
ber at  the  beginning  and  at  the  end  of  the  half 
century  period,  with  a  minimum  in  1800;  while 
hosiery  and  knit  goods,  glass  and  silk  goods  have 
more  establishments  than  at  any  other  time  during 
the  half  century.  They  have  all,  however,  main- 
taine'd  an  almost  uninterrupted  growth  in  all  the 
four  items  shown  in  the  comparative  table." 

The  Director  of  the  Census  then  proceeds  to 
make  this  tendency  toward  concentration  still  more 
clear  by  dividing  the  manufacturing  establishments 
into  classes  according  to  the  number  of  persons 
employed,  thus:  the  total  number  of  factories 
proper  which  excludes  the  hand  trades,  is  given 
as  296,440,  of  which  number  41,687  were  operated 
by  the  proprietors  alone  without  the  assistance  of 
any  employees;  125,890  employed  less  than  five 
persons  each ;  79,756  employed  from  five  to  twenty 
persons  each;  24,630  employed  from  twenty-one 
to  fifty  persons  each;  8,494  employed  from  one 
hundred  to  two  hundred  and  fifty  persons  each; 
2,809  employed  from  two  hundred  and  fifty-one  to 
^Ye  hundred  persons  each;  1,063  employed  from 
■tve  hundred  to  one  thousand  persons  each,  and  443 
employed  over  one  thousand  persons  each. 


C' 


Trusts  and  Monopolies.  in 

W^e  believe  that  the  full  significance  of  this 
classification  can  be  more  forcibly  brought  out  by 
extending  the  Census  figures  so  as  to  present  a 
comparison  of  the  number  of  persons  employed 
by  these  respective  classes.  To  secure  the  figures 
necessary  for  this  purpose  we  shall  multiply  the 
number  of  the  establishments  in  each  class  by  the 
number  representing  the  smallest  number  of  per- 
sons employed  in  it,  which  will  give  us  the  mini- 
mum number  of  persons  employed  in  each  class. 
We  adopt  the  minimum  number  of  persons  reported 
to  have  been  employed  because  the  Census  tables 
do  not  mention  any  limit  within  which  an  estimate 
of  the  number  of  persons  employed  by  the  class 
of  establishments  employing  over  one  thousand 
persons  each  might  fairly  be  confined,  and  any  at- 
tempt, therefore,  to  fix  upon  either  a  maximum  or 
an  average  number  of  employees  for  this  class  must 
be  based  solely  upon  conjecture  which  might  prove 
to  be  very  unfair  to  the  showing  of  the  other 
classes.  The  minimum  number  of  employees  of 
all  classes  is,  on  the  other  hand,  definitely  stated 
in  the  classification,  and  we  prefer  to  accept  it  as 
given,  believing  that  it  will  afford  a  means  of 
comparison  which  will  be  equally  fair  to  all. 

We  then  find  the  number  of  persons  employed 
by  the  several  classes  to  be  as  follows:  41,687  es- 
tablishments had  no  employees;  125,890  es- 
tablishments employed  125,687  persons;  79,756  es- 
tablishments employed  398,780  persons;  24,63'5 
establishments  employed  517,335  persons;  11,663 
establishments  employed  594,813  persons;  8,494 
establishments  employed  857,894  persons;  2,809 
establishments  employed   705,059   persons;   1,063 


112  Combinations, 

•establishments  employed  532,563  persons,  and  443 
establishments  employed  443,443  persons. 

From  this  it  appears  that  271,968,  or  ninety-one 
and  seven-tenths  per  cent,  of  all  the  manufacturing 
establishments  reporting,  employed  from  one  to 
fifty  persons  each,  while  only  24,472,  or  eight  and 
three-tenths  per  cent,  of  the  whole  number  of  es- 
tablishments, employed  more  than  fifty  persons 
each;  but  these  27i,968  small  establishments,  or 
ninety-one  and  seven-tenths  per  cent,  of  the  whole,5 
employed  only  1,042,000  persons,  or  a  trifle  less 
than  twenty-five  per  cent,  of  the  whole  number 
employed  by  all  establishments,  while  the 
24,472  establishments,  employing  over  fifty  per- 
sons each,  or  eight  and  three-tenths  per  cent,  of  the 
whole,  employed  3,133,772  persons,  or  a  trifle  more 
than  seventy-five  per  cent,  of  the  whole  number  of 
persons  employed  by  all  establishments. 

The  evidence  afforded  by  the  foregoing  figures 
of  the  rapid  concentration  of  the  manufacturing 
interests  of  the  country  into  the  hands  of  a  few 
individuals,  is  further  supported  by  the  statistics 
furnished  in  Volume  VII.  of  the  Twelfth  Census, 
relative  to  the  form  of  organization  adopted  by  in- 
<iustrial  establishments.  In  this  classification, 
however,  the  figures  include  the  hand  trades,  which 
'do  not  lend  themselves  so  readily  to  concentration 
into  large  establishments  as  does  the  work  of  manu- 
facturing proper,  and  this  must  greatly  detract 
from  the  showing  which  would  be  made  if  the  hand 
trades  could  be  excluded ;  but  the  evidence  of  the 
tendency  toward  concentration  is  still  sufficiently 
pronounced  to  warrant  us  in  calling  special  at- 
tention to  it.     Of  the  512,254  establishments  re- 


Trusts  and  Monopolies.  113' 

ported  to  have  been  engaged  in  manufacturing  and 
mechanical  industries,  372,703,  or  seventy-two  and 
eight-tenths  per  cent,  of  the  whole  were  owned  and 
operated  by  individual  proprietors,  and  produced 
$2,674,497,008  worth  of  goods,  or  twenty  and  six- 
tenths  per  cent,  of  the  total  value  of  products  re- 
turned for  the  year;  96,715,  or  eighteen  and  nine- 
tenths  per  cent,  of  the  total  number  of  establish- 
ments, were  owned  and  operated  by  partnerships, 
and  produced  $2,565,360,839  worth  of  goods,  or 
nineteen  and  seven-tenths  per  cent,  of  the  whole ; , 
40,743,  or  seven  and  nine-tenths  per  cent,  of  the 
total  number  of  establishments  were  owned  and 
operated  bv  corporations,  and  produced  goods 
valued  at  $7,733,582,531,  or  fifty-nine  and  five- 
tenths  per  cent,  of  the  gross  value  of  all  products 
reported. 

Not  satisfied  wath  this  rapid  acquisition  of  so 
large  a  percentage  of  the  production  of  the  entire 
country  by  a  comparatively  few  corporations,  they 
have  begun  to  combine  with  each  other  into  still 
greater  corporations,  which  are  commonly  known 
as  combinations.  And  we  find  given,  in  the  same 
volume  of  the  Twelfth  Census,  the  names  of  one 
hundred  and  eighty-five  industrial  combinations, 
which,  in  point  of  numbers,  are  less  than  one-half 
of  1  per  cent,  of  the  total  number  of  manufactur- 
ing establishments  controlled  by  corporations,  but 
which  produced  during  the  census  year,  products 
to  the  value  of  $1,667,350,949,  or  twenty-one  and 
five-tenths  per  cent,  of  the  total  production  of  all 
corporations.  Or,  in  other  words,  these  one  hun- 
dred and  eighty-five  combinations  produced  more 
in  one  year  than  232,351  manufacturing  establish- 


!i  14  Combinations, 

ments  controlled  by  individuals  produced  during 
the  same  time ;  and  the  average  production  of  each 
of  these  combinations  exceeded  that  of  1,254  indi- 
vidual establishments. 

The  foregoing  figures  present  the  situation  as 
it  was  in  the  year  1900,  but  these  great  industrial 
combinations  had  only  just  begun  to  assume  a 
commanding  position  among  the  industrial  insti- 
tutions of  the  country;  the  rush  to  combination 
had  only  fairly  set  in,  and  the  situation,  as  out- 
lined, serves  rather  to  indicate  the  possibilities  of 
the  future  than  to  present  anything  like  a  com- 
plete development  of  the  spirit  of  centralization 
which  seems  to  have  taken  such  complete  posses- 
sion of  the  industrial  world. 

As  may  be  seen  from  the  table  of  one  hundred 
and  eighty-five  industrial  combinations  repro- 
duced from  the  Twelfth  Census  and  printed  else- 
where in  this  work,  only  five  were  organized  prior 
to  the  year  1889.  During  the  next  seven  or  eight 
years  they  began  to  increase  at  what  was  then 
thought  to  be  an  alarming  rate;  but  from  about 
the  beginning  of  the  year  1898  the  tendency 
toward  combination  began  to  reach  fever  heat  and 
to  assume  the  proportions  of  an  epidemic,  and 
combinations  and  trusts  began  to  be  the  all-engross- 
ing topic  of  conversation  among  all  classes  of  so- 
ciety. The  rapidity  with  which  the  number  of 
combinations  multiplied  during  the  last  few  years 
of  the  nineteenth  century  is  thus  expressed  by  the 
Director  of  the  Census:  "The  list  given  in  Table 
XXIX.  reveals  the  fact  that  sixty-five  of  the  one 
hundred  and  eighty-five  corporations  herein  treated 


Trusts  and  Monopolies.  115 

as  industrial  combinations  were  organized  prior  to 
the  year  1897,  and  that  in  the  years  1897,  1898, 
1899  and  prior  to  June  30,  1900,  there  were  or- 
ganized eight,  twenty,  seventy-nine  and  thirteen 
corporations  respectively.  Of  the  total  number, 
ninety-two,  or  forty-nine  and  seven-tenths  per  cent, 
were  chartered  during  the  eighteen  months  from 
January  1,  1899,  to  June  30,  1900.  This  whole- 
sale reorganization  of  industry,  right  upon  the  eve 
of  the  taking  of  the  present  census,  thrust  upon 
the  division  of  manufactures  a  multiplicity  of  prob- 
lems such  as  had  never  before  confronted  it." 

This  wonderful  increase  in  the  number  and 
eize  of  the  industrial  combinations  which  marked 
the  closing  years  of  the  nineteenth  century,  has 
continued  without  abatement  to  the  present  time, 
and  to-day  there  is  nothing  more  familiar  to  the 
readers  of  our  newspapers  than  the  announcement 
of  the  incorporation  of  some  new  combination,  and 
rumors  of  the  formation  of  others  are  almost  con- 
stantly afloat.  An  evidence  of  the  degree  of  de- 
velopment to  which  combinations  have  attained 
since  the  date  of  the  statistics  already  given,  is 
found  in  the  case  of  the  United  States  Steel  Cor- 
poration, which  was  chartered  by  the  State  of  I^ew 
Jersey,  February  25,  1901.  It  was  formed  by  a 
combination  of  nine  of  the  combinations  shown  in 
the  census  table,  which  together  controlled  two 
hundred  and  thirty-four  plants,  with  the  Lake 
Superior  Consolidated  Iron  Mines  and  the  Car- 
negie Company,  and  has  an  authorized  capitaliza- 
tion of  $1,404,000,000. 

The  magnitude  of  this  great  combination  can 
perhaps  be  more  fully  appreciated  when  it  is  noted 


ii6  Combinations, 

that  the  capitalization  of  this  one  corporation  is 
equal  to  thirty-eight  and  seven-tenths  per 
cent,  of  the  total  authorized  capitalization  of  the 
one  hundred  and  eighty-five  combinations  shown  in 
the  census  table;  and  its  influence  in  the  iron  and 
steel  industry  can  in  some  measure  be  imagined 
when  it  is  remembered  that  the  total  capitalization 
of  all  the  combinations  shown  by  the  census  table 
to  be  engaged  in  the  iron  and  steel  industry  was 
only  $978,799,000,  or  only  a  little  more  than  two- 
thirds  of  the  capitalization  of  this  one  new  com- 
bination, which  is  one  of  the  earliest  productions 
of  the  twentieth  century.  We  here  present  a  table 
taken  from  the  sworn  answer  of  Mr.  Charles  M. 
Schwab,  President  of  the  United  States  Steel  Cor- 
poration in  the  case  of  Hodge,  et  al,  vs.  the  United 
States  Steel  Corporation,  which  will  serve  to  show 
the  extent  and  variety  of  the  properties  held  and 
controlled  by  this  corporation. 

VALUE  OF  ASSETS. 

Iron  and  Bessemer  ore  properties $700,000,000 

Plants,    mills,    fixtures,    machinery,    equipment, 

tools  and  real  estate 300.000,000 

Coal    and    coke   fields    (87,589    acres) 100,000,000 

Transportation    properties,    including    railroads 
(1,467    miles),    terminals,    doclcs,    ships 
(112),  equipment    (23,185  cars  and  428 

locomotives,    etc.) 80,000,000 

Blast  furnaces   48,00(».000 

Natural  gas  fields 20,000,000 

Limestone  properties  4,000.000 

Cash  and  cash  assets  as  of  June  1,  1902 148,281.000 

Total    $1,400,281,000 

The  following  list  includes  the  names  of  the 
more  important  combinations  organized  since  June 


Trusts  and  Monopolies.  117 

30,  1900,  together  with  the  names  of  about  twenty 
organized  during  the  year  or  two  preceding  that 
date,  but  which  were  omitted  from  the  census 
table. 

The  Allis-Chalmers  Co.,   1901 $36,250,000 

American  Alkali  Co.,  1899 30,000,000 

American  Can  Co.,  1901 88,000,000 

American  Cigar  Co.,  1901 10,000,000 

American  Liglit  &  Traction  Co.,  1901 12,127,800 

American  Locomotive  Co.,  1901 50,412,500 

American  Machine  &  Ordnance  Co.,  1902 10,000.000 

American   Pacliing  Co.,   1SJ02 20,000,000 

American  Plow  Co.,  1902    75,000,000 

American  Pneumatic  Service  Co.,  1899 15,000,000 

American  Railway  Equipment  Co.,  1899 22,000,000 

American  Sash  &  Door  Co.,  1900 7,000,000 

American  Sewer  Pipe  Co.,  1900 10,000,000 

American   Steel   Foundries  Co.,   1902 30,000,000 

Associated  Merchants  Co.,  1901 15,000,000 

Atlantic  Rubber  Shoe  Co.,   1901 10,000,000 

A.  Booth  &  Co.,  1898 5,500,000 

Borden's  Condensed  Millc  Co.,   1899 25,000,000 

Chicago  Pneumatic  Tool  Co.,  1902 10,000,000 

Colonial  Lumber  &  Box  Corporation,  1902 15,000,000 

Consolidated  Railway  Lighting  and  Equipment 

Co.,  1901    17,000,000 

Consolidated  Tobacco  Co.,  1901 262,089,200 

Corn  Products  Co.,   1902 80,000,000 

Crucible  Steel  Co.  of  America,  1900 50,000,000 

Distilling  Co.  of  America,  1899 85,000,000 

Eastman  Kodak  Co.,   1901 35,000,000 

Electric  Co.  of  America,  1899 20,368,400 

Electrical  Vehicle  Co.,  1899 18,000,000 

Empire  Steel  &  Iron  Co.,  1899 10,000,000 

Fairmount  Coal   Co.,   1901 12,000,000 

Great  Lakes  Towing  Co.,  1899 5,000,000 

Harbison-Walker   Refractories  Co.,   1902 25,750,000 

Illinois  Brick  Co.,  1900 9,000,000 

International    Harvester    Co.,    1902 120,000,000 

International  Mercantile  Marine  Co.,  1902 120,000,000 

International   Nickel   Co.,   1902 120,000,000 

Jones  &   Laughlln   Steel   Co.,   1902 30,000,000 

Monongahela  River  Cons.  Coal  and  Coke   Co., 

18<.9    30,000,000 

National  Asphalt  Co.,  1900 31,000,000 

National  Candy  Co.,  1902 ^  3^9^j^9 

National  Fireprooflng  Co.,  1899 12,500,000 

New  England  Cotton  Yarn  Co.,  1899 15,577,000 

New  York  Dock  Co.,  1901 28,500,000 

Pacific  Hardware  &  Steel  Co.,  1902 10,000,000 

Pennsylvania  Steel  Co.,  1901 50,000,000 

Planters  Compress  Co.,  1899 10,000,000 


ii8  Combinations, 

Quaker  Oats  Co.,  1901 $12,000,000 

Railway   Steel    Spring  Co.,   1902 lio.uoo, UOO 

Sloss-Sheffield  Steel  &  Iron  Co.,   1899 liJ.ooo.uoo 

Standard   Milling  Co.,   1900 1  7.i.'."j0,000 

Standard  Table  Oil  Cloth  Co.,  1901 l(i.n(i(».()00 

Union  Steel  &  Chain  Co.,  189'.) (;<».( mjo.uuO 

United  Box  Board  &  Paper  Co.,  1902 ;^n.<iuu.o()0 

United  Copper  Co.,  1902 .''•o,(tuo,(»»a 

United  Fruit  Co.,  1899 liO,O0U,UO0 

United  States  Cast-Iron  Pipe  and  Foundry  Co, 

1899    25,000,000 

United  States  Cotton  Duck  Corporation,  1901 . .  30,000,000 
United    States    Realty    and    Construction    Co., 

1902 CG,000,000 

United  States  Reduction  &  Refining  Co.,  1901.  12.000,000 

United  States  Ship  Building  Co.,  1902 Tl.oott.ouo 

United    States    Steel    Corporation,    1901 I,4o4.ouo.uu0 

Universal  Tobacco  Co.,  1901 10, 000,000 

Having  now  seen  how  completely  the  sources  of 
production  have  been  brought  within  the  control 
of  a  comparatively  few  individuals,  let  us  inquire 
to  what  extent  have  combinations  been  successful 
in  securing  control  of  the  production  of  the  ar-. 
tides  in  the  manufacture  of  which  they  are  en- 
gaged. From  the  testimony  given  before  the  In-'*' 
dustrial  Commission  in  1899,  we  learn  that  at  that 
time  the  Federal  Steel  Company  produced  thirty 
per  cent,  of  the  entire  production  of  the  class  of 
goods  manufactured  by  it ;  the  National  Steel  Com- 
pany produced  eighteen  per  cent,  of  its  class  of 
products;  the  American  Steel  and  Wire  Company 
produced  seventy-five  to  eighty  per  cent,  of  the 
entire  production  of  steel  rods  and  smooth  wire, 
sixty-five  to  ninety  per  cent,  of  wire  nails,  and  had 
an  absolute  monopoly  of  the  production  of  barbed 
wire  and  woven  wire  fencing;  the  American  Tin 
Plate  Company  produced  over  ninety  per  cent,  of 
the  tin  plate  manufactured  in  this  country.  All 
of  these  companies  have  since  been  absorbed  by  the 
United  States  Steel  Corporation.     The  American 


Trusts  and  Monopolies.  119 

Sugar  Refining  Company  controlled  ninety  per 
cent,  of  the  entire  production  of  refined  sugar;  the 
Standard  Oil  Company  controlled  from  eighty-one 
to  eighty-three  per  cent,  of  the  entire  output  of  re- 
fined oil ;  the  Whiskey  Combination  controlled  from 
eighty  to  ninety-five  per  cent,  of  the  production  of 
distilled  spirits,  and  the  Anthracite  Coal  Com- 
bination controlled  ninety  per  cent,  of  the  output 
of  that  product. 

Mr.  Horace  L.  Wilgus,  in  his  ''Study  of  the 
United  States  Steel  Corporation,"  gives  the  follow- 
ing as  the  percentage  of  the  entire  output  of  the 
several  products  controlled  by  that  corporation: 
iron  ore,  over  fifty  per  cent.;  bessemer  ore,  ninety 
per  cent. ;  coke,  over  fifty  per  cent. ;  pig  iron,  fifty 
per  cent. ;  steel  rails,  sixty-eight  per  cent. ;  steel  bil- 
lets, nearly  the  entire  product ;  structural  steel,  sixty 
per  cent.;  a  large  percentage  of  plate  steel,  shee^ 
steel,  bars,  hoops  and  cotton  ties;  tin  plate,  over 
ninety  per  cent. ;  steel  tubes,  over  ninety  per  cent. ; 
Avire  rods  and  smooth  wire,  over  ninet)^  per  cent,  of 
each ;  wire  nails,  over  ninety-five  per  cent. ;  barbed 
wire  and  woven  wire  fencing,  an  absolute  monop- 
oly, and  bridge  and  building  construction,  from 
eighty-five  to  ninety  per  cent. 

A  combination  controlling  ninety  per  cent,  of 
black  merchant  pipe  and  skelp  was  formed  in  1899 ; 
a  combination  controlling  from  ninety  to  ninety- 
five  per  cent,  of  the  production  of  starch  and  glu- 
cose was  formed  in  1897;  a  combination  control- 
ling sixty  per  cent,  of  the  production  of  crackers, 
etc.,  was  formed  in  1898 ;  the  American  Can  Com- 
pany is  said  to  control  eighty-five  per  cent,  of  the 
production  of  tin  cans  in  the  United  States;   the 


J20  Combinations, 

American  Hide  and  Leather  Company  controls 
seventy-five  per  cent,  of  the  upper  leather  output 
of  the  country;  the  American  Linseed  Oil  Com- 
pany controls  eighty-five  per  cent,  of  the  produc- 
tion of  linseed  oil;  the  American  Radiator  Com- 
pany controls  seventy-five  per  cent,  of  the  steam 
and  water  heating  business  of  the  United  States; 
the  American  Window  Glass  Company  controls 
seventy  per  cent,  of  the  output  of  the  United 
States;  the  American  Writing  Paper  Company 
controls  seventy-six  per  cent,  of  the  output  of  the 
United  States;  the  Otis  Elevator  Company  con- 
trols eighty-five  per  cent,  of  the  elevator  business 
of  the  country;  the  I'nim  Bag  and  Paper  Com- 
pany controls  ninety  per  cent,  of  the  paper  bag 
business  of  the  United  States;  the  Union  Box 
Board  and  Paper  Company  controls  over  ninety 
per  cent,  of  the  strawboard  and  newsboard  pro- 
duced in  the  United  States ;  the  United  States  En- 
velope Company  controls  ninety  per  cent,  of  the 
commercial  envelopes  used  in  the  United  States; 
the  United  States  Rubber  Company  controls  sev- 
enty-five per  cent,  of  the  output  of  rubber  boots, 
shoes,  etc.,  of  the  country;  and  the  National  Salt 
Company  controls  ninety-five  per  cent,  of  the  salt 
output  of  the  United  States. 

We  believe  that  these  instances  of  leading  arti- 
cles in  which  combinations  have  already  acquired 
command  of  a  controlling  percentage  of  production, 
will  suffice  to  show  that  combinations  for  the  pur- 
pose of  controlling  production,  are  no  longer  mere 
creatures  of  fancy,  or  theoretical  speculations  as 
to  future  conditions;  that  they  are  not  merely 
isolated  cases  peculiar  to  any  one  class  of  Indus- 


Trusts  and  Monopolies.  121 

tries,  and  of  interest  only  to  the  student  of  political 
economy,  because  of  their  novelty,  or  of  their  un- 
natural development;  but  that  they  are  living 
realities  which  are  rapidly  assuming  control  of  our 
industrial  system,  and  which  we  must  prepare  to 
meet  with  adequate  regulations  and  restrictions, 
if  we  do  not  wish  to  see  the  rights  of  the  indi- 
vidual made  subservient  to  the  demands  and  power 
of  combinations. 

The  theory  has  been  advanced  that  there  is  in 
every  industry  a  certain  point  of  maximum  effi- 
ciency beyond  which  expansion  ceases  to  be  profit- 
able, and  which  will,  therefore,  serve  as  an  auto- 
matic check  upon  the  growth  of  combination  and 
monopoly.  Electric  lighting  plants  are  cited  as  an 
instance  of  the  operation  of  this  principle. 
It  is  said  that  when  the  capacity  of  the 
dynamo  has  once  been  reached,  it  would  re- 
quire the  additional  outlay  of  an  equal  amount 
of  capital  to  enable  the  plant  to  furnish  a 
greater  amount  of  light;  and  that  until  the  capac- 
ity of  the  new  machinery  was  fully  employed,  the 
profits  would  not  be  increased  materially,  and 
might,  for  a  time  at  least,  be  even  less  than  they 
were  before  the  expansion.  It  occurs  to  us,  how- 
ever, that  there  are  considerations,  such  as  the  pur- 
chase and  distribution  of  supplies  and  equipments, 
the  rent  or  purchase  of  grounds  and  buildings,  the 
salaries  of  officials,  the  procuring  of  franchise,  the 
construction  of  subways,  extensions,  etc.,  which 
might  very  materially  affect  this  showing,  and 
which  tend  to  indicate  that  there  are  advantages 
to  be  found  in  combination  even  in  this  class  of 
cases. 


122  Combinations, 

We  are  willing  to  admit  that  in  the  case  of 
electric  light  and  power  plants,  gas  plants,  street 
railways,  and  other  natural  monopolies  upon  which 
local  conditions  impose  natural  limitations  to  their 
power  of  expansion,  the  cost  of  production  may  not 
be  reduced  by  combination  to  the  same  extent  that 
it  is  in  the  case  of  manufacturing  and  other  indus- 
trial establishments,  but  from  the  acquisition  of  a 
large  portion  of  the  street  railway  systems  of  Chi- 
cago, Philadelphia,  Cincinnati  and  Indianapolis,  by 
the  Elkins-Widener- Whitney  syndicate  of  Philadel- 
phia ;  the  control  of  all  the  available  electric  routes 
between  Cleveland  and  Cincinnati,  the  Western 
Ohio  Traction  Company,  the  Southern  Ohio  Trac- 
tion Company,  the  Miami  and  Erie  Traction  Com- 
pany, the  Cleveland,  Ebyria  and  Western  Railway, 
the  Cincinnati,  Dayton  and  Toledo  Railway,  and  a 
number  of  Illinois  companies, by  the  Pomeroy-Man- 
delbaum  syndicate  of  Cleveland ;  and  the  control  of 
the  electric  lighting  companies  of  Camden  and 
Atlantic  City,  of  New  Jersey;  Scranton,  Altoona, 
Dunmore  and  Conshohocken,  Pennsylvania; 
Bridgeport  and  Canton,  Ohio;  Rockford,  Illinois; 
Wheeling,  West  Virginia;  Jamaica  and  Long 
Island  City,  Long  Island;  Auburn,  New  York, 
and  other  towns,  by  the  Electric  Company  of 
America ;  it  would  seem  that  there  are  inducements 
to  form  combination-,  even  in  this  class  of  cases, 
and  the  limit  to  which  combinations  may  be  car- 
ried, does  not  yet  appear  to  have  been  discovered. 

In  relation  to  other  classes  of  industry,  however, 
the  great  size  and  enormous  capacity  of  production 
which,  as  we  have  seen,  have  already  been  attained 
by    combinations    in    nearly    every    conceivable 


Trusts  and  Monopolies.  123 

branch  of  trade,  would  seem  to  preclude  the  hope 
of  discovering  any  point  of  maximum  efficiency 
which  would  fall  short  of  the  point  at  which  the 
demand  for  consumption  ceases. 

Some  years  ago  we  might  have  been  induced  to 
believe  that  the  direction  and  control  of  a  manu- 
facturing establishment  in  which  all  the  various 
processes  of  the  production  of  an  entire  line  of 
industry  (such  as  that  of  iron  and  steel — from  the 
extraction  of  the  raw  materials  from  the  earth  to 
the  delivery  of  the  finished  product  to  the  con- 
sumer), were  to  be  conducted  upon  so  large  a  scale 
as  to  supply  the  demands  of  eighty  millions  of  peo- 
ple, would  present  difficulties  which  were  beyond 
the  capacity  of  any  individual  man  to  surmount; 
but  the  continuous  evolution  of  our  industrial 
capabilities,  from  the  individual  laborer,  to  the  bil- 
lion dollar  steel  corporation,  proves  how  useless  it  is 
to  attempt  to  estimate  the  heights  to  which  human 
ambition  and  enterprise  may  aspire,  and  the  ca- 
pacity of  the  machinery  of  production  appears  to  be 
quite  as  expansive  as  the  capacity  of  those  who  de- 
sign and  operate  it. 

We  think  of  no  instance  in  the  industrial  field 
in  which  expansion  of  combination  ceases  to  be 
profitable,  so  long  as  it  is  unrestricted  in  the  ex- 
ercise of  the  powers  which  expansion  brings  within 
its  control;  and  we  have  learned  of  no  industrial 
combination  dissolving  because  it  had  overreached 
the  point  of  largest  net  returns.  We  do  know, 
however,  that  combinations  are  continually  grow- 
ing larger  and  larger.  Even  the  United  States 
Steel  Corporation  is  steadily  adding  to  its  hold- 
ings;  in  December,  1902,  it  purchased  new  prop- 


ii24  Combinations, 

erties  to  provide  for  which  forty-five  million  dol- 
lars worth  of  bonds  were  issued,  and  it  is  stated 
that  negotiations  are  now  in  progress  looking  to 
the  purchase  of  properties  of  much  greater  impor- 
tance ;  and  we  can  rest  assured  that  the  financiers 
who  are  behind  these  great  combinations  would  not 
keep  on  extending  their  grasp  upon  the  industries 
of  the  country  if  they  did  not  find  it  profitable  to 
do  so. 

It  seems  clear,  then,  that  we  cannot  safely  rely 
upon  any  self-interest  to  regulate  the  size  or  ex- 
tent of  these  combinations,  and  that,  if  we  desire 
to  place  any  restrictions  or  regulations  upon  their 
future  development,  we  must  do  so  by  positive  pro- 
visions of  law. 

The  point  is  made  by  Professor  Ely  that  mere 
mass  of  capital  does  not  necessarily  lead  to  mo- 
nopoly, which  distinction  is  made  for  the  purpose 
of  indicating  that  towards  industrial  institutions 
owned  either  by  individuals  or  by  corporations 
which  are  the  result  either  of  natural 
growth  or  of  legitimate  investment,  although 
they  may  have  attained  to  great  size,  a  dif- 
ferent course  of  procedure  should  be  adopted  from 
that  which  is  to  be  pursued  towards  combinations 
which  have  manifested  pronounced  tendencies  to 
monopoly. 

We  admit  that  mass  of  capital  in  the  hands  of 
an  individual  does  not  necessarily  lead  to  monop- 
oly, but  neither  does  mass  of  capital  in  the  hands 
of  a  combination  necessarily  lead  to  monopoly.  We 
have  shown,  however,  that  in  the  nature  of  things, 
mass  of  capital  in  the  hands  of  a  combination  does 
almost  inevitably  lead  to  the  exercise  of  monopolis- 


Trusts  and  Monopolies.  125, 

tic  power;  the  same  capital  affords  to  the  indi- 
vidual the  same  opportunities :  their  purposes  are 
the  same;  the  temptations  are  the  same;  the  hu- 
man nature  of  the  individuals  concerned  in  each  is 
the  same,  and  we  are  forced  to  believe  that  their 
grasp  at  monopoly  would  be  very  much  the  same. 

It  requires  no  argument  to  show  that  the  smallei: 
the  number  of  persons  concerned  in  a  given  matter, 
the  easier  it  is  to  establish  an  agreement  between 
them;  it  is  equally  clear  that  the  larger  the  mass 
of  capital  and  the  greater  the  size  of  the  establish- 
ments engaged  in  a  given  industry,  the  fewer  there 
will  be  of  them ;  it  follows  then  that  the  possession, 
of  large  amounts  of  capital  by  individuals  or  cor- 
porations engaged  in  business,  greatly  simplifies 
the  making  of  agreements,  and  leads  readily  to 
combination ;  and,  as  we  have  already  seen,  the  end 
of  combination  is  monopoly. 

Having  thus  seen  that  the  larger  the  establish- 
ments, the  more  easily  can  combination  be  ef- 
fected, it  merely  requires  a  little  reflection  to  see 
further  that  the  larger  the  establishments,  the  more 
willing  are  their  proprietors  to  form  combinations. 
This  arises,  in  the  first  place,  from  the  fact  that 
the  step  from  an  independent  establishment  which 
controls  a  large  percentage  of  the  production  of  its 
commodities,  to  a  combination  which  is  to  control 
nearly  the  whole  production,  is  not  so  great  as  that 
from  a  small  establishment  into  a  great  combina- 
tion; in  the  second  place,  the  proprietors  of  large 
establishments  know  that  they  will  be  able  to  exert 
a  greater  amount  of  influence  in  controlling  the 
affairs  of  the  combination  into  which  they  are  about 
to  enter ;  and  in  the  third  place,  the  proprietors  of 


.126  Combinations, 

large  establishments  are  more  likely  to  have  con- 
sidered the  possibilities,  advantages,  and  opportu- 
nities of  combination,  than  are  the  proprietors  of 
email  concerns  which  are  so  much  further  removed 
from  the  possibilities  and  temptations  of  monopoly. 

This  disposition  on  the  part  of  large  institutions 
io  combine  has  become  so  well  recognized,  that, 
whenever  the  formation  of  a  new  combination  is 
announced,  we  at  once  expect  to  find  the  largest 
establishments  in  the  industry  as  the  leading 
movers  in  the  combination;  and  when  the  names 
of  the  combining  concerns  are  reported,  it  is  usually 
found  that  they  are  at  the  head  of  the  list.  The 
smaller  establishments  can  be  forced  to  join  the 
combination  later,  or  be  left  to  themselves,  as  the 
case  may  be,  but  the  combinations  are  nearly  al- 
ways formed  and  controlled  by  the  more  important 
concerns.  Thus,  in  the  formation  of  the  United 
States  Steel  Corporation,  it  was  only  the  largest 
iron  and  steel  combinations  which  united  with  the 
largest  steel  company  in  the  country,  the  Carnegie 
Company,  to  form  the  greatest  industrial  combina- 
tion yet  known  to  the  world. 

A  more  general  showing  of  this  tendency  of  large 
Establishments  to  combination,  and  one  which  has 
the  advantage  of  being  supported  by  governmental 
statistics,  may  be  found  from  a  more  careful  inspec- 
tion of  the  census  figures  already  shown.  It  there 
appears  that  the  total  number  of  corporations  en- 
gaged in  manufacture  and  mechanical  industries 
was  40,743,  that  of  these  185  were  combinations 
and  controlled  2,216  plants,  of  which  176  were  idle 
during  the  census  year;  but  the  remaining  2,040 
plants  which  were  operated  by  the  combinations. 


Trusts  and  Monopolies.  127 

or  five  per  cent,  of  the  total  number  of  corporations 
engaged  in  manufacture,  produced  during  the  year 
1900,  products  valued  at  $1,667,350,949,  or 
twenty-one  and  five-tenths  per  cent,  of  the  total 
production  for  all  corporations. 

Thus  we  see  that  the  average  production  of  each 
plant  operated  by  the  combinations,  is  more  than 
four  times  as  large  as  the  average  production  of 
each  one  of  the  entire  number  of  corporations  en- 
gaged in  manufacture;  and  more  than  one  hun- 
dred and  ten  times  as  large  as  the  average  pro- 
duction of  each  of  the  manufacturing  establish- 
ments operated  by  individual  proprietors:  all  of 
which  serves  to  prove  that  it  is  the  largest  estab- 
lishments which  are  most  likely  to  combine,  and 
that  if  we  wish  to  restrict  further  combination,  we 
must  reach  these  large  independent  establishments 
as  well  as  the  combinations  which  have  already 
been  formed. 

We,  therefore,  contend  that  the  same  general 
method  of  treatment,  should,  so  far  as  prac- 
ticable, be  applied  to  great  aggregations  of 
capital  whether  held  by  individuals,  corporations 
or  combinations;  believing  that  it  is  better  to  re- 
move the  temptation  and  the  power  to  do  mischief, 
than  merely  to  apply  the  remedy  after  the  mis- 
chief has  been  done. 

But  while  combinations  have  attained  to  such 
magnitude  and  influence  in  the  industrial  world, 
have  their  effects  been  felt  or  recognized  by  the  peo- 
ple? The  answer  to  this  is  found  in  almost  daily 
utterances  of  the  press  of  all  sections  of  the  coun- 
try, and  in  the  frequent  references  to  the  subject 
of  trusts  and  combinations  which  are  found  in  the 


128  Combinations, 

public  addresses  of  men  of  all  classes  and  conditions 
of  society  from  the  President  of  the  United  States, 
members  of  his  Cabinet,  United  States  Sena- 
tors, Congressmen,  and  Governors  of  states, 
down  to  lawyers,  college  professors,  clerg}'- 
men,  business  men,  and  laboring  men,  all 
of  which  denounce,  in  terms  more  or  less 
severe,  trusts  and  combinations  formed  for  the 
purpose  of  controlling  production  and  raising 
prices,  and  promise  or  demand  relief  from  condi- 
tions which  now  oppress  the  people,  and  from  still 
greater  evils  which  seem  to  be  impending  over 
them. 

During  the  year  1900  five  political  parties, 
namely,  the  Republican  party,  the  Democratic 
party,  the  non-fusion  wing  of  the  People's  party, 
the  fusion  wing  of  the  People's  party,  and  the  Silver 
Republican  party,  in  their  national  conventions, 
adopted  as  part  of  their  platforms,  resolutions 
condemning  trusts  and  combinations  in  restraint  of 
trade,  and  promising  to  deliver  the  people  from  the 
evils  and  oppression  of  monopoly.  During  the  same 
year,  seventy  state  conventions  adopted  similar 
resolutions. 

A  more  general  demand  for  the  reform  of  any 
social  or  political  evil  can  hardly  be  imagined  than 
that  which  the  people  of  this  country  have  made 
for  the  regulation  of  industrial  trusts  and  combi- 
nations; yet  no  regulations  or  restrictions  have 
thus  far  been  placed  upon  them.  The  conditions 
which  elicited  these  numerous  expressions  of  ear- 
nest solicitude  from  the  public  press,  and  from  pub- 
lic men  of  all  political  parties  and  beliefs  repre- 
senting all  sections  of  the  country,  and  which  gave 


Trusts  and  Monopolies.  129 

rise  to  the  general  feeling  of  dissatisfaction  result- 
ing in  this  unprecedented  demand  for  reform  pro- 
claimed by  seventy-five  State  and  National  Conven- 
tions during  the  year  1900,  have  not  been  re- 
lieved, but  have  been  growing  daily  more  and  more 
aggravating  and  oppressive.  It  would  seem,  there- . 
fore,  that  the  situation  is  sufficiently  grave  to  in- 
duce the  thoughtful  reader  to  seek  further  and  en- 
deavor to  find  a  remedy  which  will  cure  the  evils 
complained  of,  and  at  the  same  time,  secure  the 
largest  possible  freedom  to  capital  and  labor,  and 
to  individuals  and  combinations  consistent  with 
the  general  good  of  all.    ^-^ 


1130  Combinations, 


CHAPTER  VII. 

LEGISLATION  AND  JUDICIAL  CONSTRUCTION. 

Sir  William  Blackstone,  in  his  commentaries 
on  the  laws  of  England,  tlius  describes  the  deter- 
mined hostility  of  the  English  people  to  monopo- 
lies, and  the  laws  and  penalties  by  means  of  which 
the  English  Government  sought  to  protect  its  people 
from  their  oppression  during  the  eighteenth  cen- 
tury. 

"The  offense  of  forestalling  the  market  is  also 
an  offense  against  public  trade.     This,  which  (as 
f^         iwell  as  the  two  following)  is  also  an  offense  at  com-, 
Y^       [nion  law,  was  described  by  statute  5  and  6  Edw. 
V/       V»'^')  C.  14,  to  be  the  buying  or  contracting  for  any 
merchandise  or  victual  coming  in  the  way  of  the 
market ;  or  dissuading  persons  from  bringing  their 
goods  or  provisions  there,  or  persuading  them  to 
enhance  the  price,  when  there :  any  of  which  prac- 
tices made  the  market  dearer  to  the  fair  trader." 

Regrating  was  described  by  the  same  statute  to 
be  the  buying  of  corn,  or  other  dead  victual,  in  any 
market,  and  selling  it  again  in  the  same  market, 
or  within  four  miles  of  the  place.  For  this  also 
enhances  the  price  of  the  provisions,  as  every  suc- 
cessive seller  must  have  a  successive  profit. 

Engrossing  was  also  described  to  be  the  getting 


Trusts  and  Monopolies.  131 

into  one's  possession,  or  buying  up,  large  quantities 
of  corn,  or  other  dead  victuals,  with  intent  to  sell 
them  again.  This  must,  of  course,  be  injurious  to 
the  public,  by  putting  it  in  the  power  of  one  or 
two  rich  men  to  raise  the  price  of  provisions  at 
their  own  discretion.  So  the  total  engrossing  of 
an}^  other  commodity,  with  intent  to  sell  it  at  an 
unreasonable  price,  is  an  offense  indictable  and 
finable  at  the  common  law.  And  the  general  pen- 
alty for  these  three  offenses  by  the  common  law 
(for  all  the  statutes  concerning  them  were  re- 
pealed by  12  Geo.  III.,  C.  71),  is  as  in  other  mi- 
nute misdemeanors,  discretionary  fine  and  im- 
prisonment. Among  the  Romans  these  offenses, 
and  other  malpractices  to  raise  the  price  of  pro- 
visions, were  punished  by  a  pecuniary  mulct. 

Monopolies  are  much  the  same  offense  in  other 
branches  of  trade,  that  engrossing  is  in  provisions ; 
being,  a  license  or  privilege  allowed  by  the  king 
for  the  sole  buying  and  selling,  making,  working 
or  using  of  anything  whatever;  whereby  the  sub- 
ject in  general  is  restrained  from  the  liberty  of 
manufacturing  or  trading  which  he  had  before. 
These  had  been  carried  to  an  enormous  height,  dur- 
ing the  reign  of  Queen  Elizabeth,  and  were  heavily 
complained  of  by  Sir  Edward  Cook  in  the  beginning 
of  the  reign  of  King  James  the  First ;  but  were  in 
great  measure  remedied  by  statute  21  Jac.  1,  C.  3^ 
which  declares  such  monopolies  to  be  contrary  to 
law  and  void  (except  as  to  patents,  not  exceeding 
the  grant  of  fourteen  years  to  the  authors  of  new 
inventions;  and  except,  also,  patents  concerning 
printing,  saltpetre,  gunpowder,  great  ordnance 
and  shot) ;  and  monopolists  are  punished  with  the 


e 


132  Combinations, 

forfeiture  of  treble  damages  and  double  costs,  to 
those  whom  they  attempt  to  disturb;  and  if  they 
procure  any  action,  brought  against  them  for  these 
damages  to  be  sta^-ed  by  any  extra  judicial  order, 
other  than  of  the  court  wherein  it  is  brought,  they 
incur  the  penalties  of  praemunire.  Combinations 
also,  among  victuallers  or  artificers,  to  raise  the 
price  of  provisions  or  any  other  commodities,  or  the 
rate  of  labor,  are  in  many  cases  severely  punished 
by  particular  statutes;  and  in  general  by  statute 
2  and  3  Edw.  VI.,  C.  15,  with  the  forfeiture  of 
£10,  or  twenty-one  days'  imprisonment  with  an  al- 
lowance of  only  bread  and  water  for  the  first  of- 
fense; £20,  or  the  pillory,  for  the  second;  and 
£40  for  the  third,  or  else  the  pillory,  loss  of  one 
ear  and  perpetual  imfamy.  In  the  same  manner 
by  a  constitution  of  the  Emperor  Zeno,  all  monopo- 
lies and  combinations  to  keep  up  the  price  of  mer- 
chandise, provisions  or  workmanship  were  pro- 
hibited upon  pain  of  forfeiture  of  goods  and  per- 
petual banishment. 

Aside  from  monopolies  which  have  been  created 
by  governmental  grants,  the  most  common  means 
of  securing  monopolies  and  the  most  essential 
requisite  to  their  successful  operation  has  been  the 
establishment  of  agreements  between  the  persons 
engaged  in  the  industries  sought  to  be  affected. 
In  order  to  prevent  the  making  of  such  agree- 
ments, the  English  courts  have,  during  the  three 
hundred  years  which  have  elapsed  since  the  making 
of  the  complaint  by  Lord  Coke,  to  which  Mr. 
Blackstone  refers,  universally  held  that  contracts 
made  in  general  restraint  of  trade,  are  contrary 
to  public  policy  and  are,  therefore,  void.     Combi- 


Trusts  and  Monopolies.  133 

nations  and  conspiracies  in  restraint  of  trade  were 
held  to  be  offenses  indictable  by  common  law,  and 
punishable  as  crimes,  and  contracts  made  for  simi- 
lar purposes  could  not  be  enforced  in  the  courts. 

Many  changes  in  the  definition  of  the  term  mo- 
nopoly, and  restraint  of  trade,  of  a  method  of  en- 
forcing the  laws  and  of  the  penalties  imposed  for 
their  violation,  have  been  made  by  statute  since  the 
days  of  which  Mr.  Blackstone  wrote ;  but  the  gen- 
eral policy  of  the  law,  in  its  opposition  to  monopo- 
lies, has  remained  the  same.  The  numerous  de- 
cisions of  the  English  courts,  in  which  this  point 
has  been  emphasized,  afford  us  definite  and  positive 
expression  of  the  experience  and  wisdom  of  centu- 
ries, and  form  the  basis  upon  which  most  of  the 
anti-trust  decisions  of  our  state  courts  have  been 
founded. 

In  the  old  English  case  of  Mitchel  versus  Eey- 
nolds,  decided  in  1711,  Lord  Macclesfield  says; 
"All  total  restraints  of  trade,  which  the  law  so         ^^ 
much   favours,   are  absolutely  bad,   and   all   the        /  i\ 
restraints,  though  only  partial  if  nothing  more        ^-^ 
appear,  are  presumed  to  be  bad ;  but  if  the  circum- 
stances are  set  forth,  that  presumption  may  be 
excluded,  and  the  courts  are  to  judge  of  those  cir- 
cumstances and  determine  whether  the  contract  be 
Talid  or  not.     Contracts  in  restraint  of  trade  in 
themselves,  if  nothing  shows  them  to  be  reason- 
able, are  bad  in  the  eyes  of  the  law.'' 

This  was  reiterated  in  the  case  of  Mallan  versus 
May,  Law  Journal,  Vol.  12,  Part  2,  page  376, 
decided  June  5,  1843 ;  and  again  with  slight  modi- 
fication in  the  case  of  Davies  versus  Davies,  in  the 


0 


i 


134  Combinations, 

Court  of  Appeals,  Law  Journal  Reports,  Vol.  56, 
page  962.    Chancery.    Decided  August  1,  1887. 

The  common  law  on  this  point,  together  with  the 
common  law  in  general,  became  part  of  the  heritage 
which  the  American  colonies  received  from  Eng- 
land, and  after  the  revolution  most  of  the  states 
adopted  it  as  a  part  of  their  fundamental  law. 
'     Most  of  the  states  have  also  recently  enacted 
1  j    what  are  commonly  called  anti-trust  statutes,  which 
!  j    are,  for  the  most  part,  merely  re-enactments  of  the 
•      common  law,  with  the  addition  of  various  penal- 
ties for  its  violation,  and  the  courts  have  adopted 
ij    the  precedents  of  the  English  cases  in  construing 
\    them. 

The  following  extracts  from  decisions  in  leading 
cases  will  serve  to  show  how  generally  this  principle 
of  the  common  law  has  been  recognized  by  our 
state  courts,  and  how  firmly  it  has  become  estab- 
lished as  a  part  of  the  laws  of  this  country. 

The  Supreme  Court  of  the  State  of  Illinois,  in 
the  case  of  the  Distilling  and  Cattle  Feeding  Com- 
pany versus  the  People,  156  Illinois  Reports,  page 
486,  defines  the  attitude  of  the  law  in  relation  to 
monopolies  as  follows:  "The  trust  obtained  pos- 
session of  nearly  all  the  distilleries  and  of  nearly 
the  entire  distillery  product  of  the  United 
States,  thus  enabling  it  to  dictate  prices  and  the 
amount  of  production,  and  to  thus  draw  to  itself 
the  substantial  control  of  the  distillery  business  of 
the  country. 

"Combinations  of  this  character  have  been  fre- 
quently made  the  subject  of  judicial  investigation 
within  the  last  few  years,  and  while  the  proceeding 
has  generally  been  against  some  one  of  the  corpora- 


Trusts  and  Monopolies.  135 

tions  entering  into  the  trust,  the  courts,  so  far  as 
they  have  had  occasion  to  speak  on  the  subject  at 
all,  have  held  such  trusts  to  be  illegal.  .  .  . 
Many  other  decisions  of  similar  importance  might 
be  referred  to  but  the  foregoing  will  suffice.  They 
are  sufficient  in  our  opinion,  to  establish  the  con- 
clusion, in  which  the  courts  of  the  country,  with 
very  great  unanimity,  seem  to  concur  that  trusts 
of  the  character  of  the  one  described  in  the  infor- 
mation so  existing  prior  to  the  organization  of  the 
defendant  corporation,  are  against  the  policy  of  the 
law,  and  are  therefore  illegal  and  void.  The  con- 
trol exercised  over  the  distillery  business  of  the 
country — over  production  and  prices — and  the  vir- 
tual monopoly  formerly  held  by  the  trust,  are  in 
no  degree  changed  or  relaxed,  but  the  methods  and 
purposes  of  the  trust  are  perpetuated  and  carried 
out  with  the  same  persistence  and  vigor  as  before 
the  organization  of  the  corporation.  There  is  no 
magic  in  a  corporate  organization  which  can  purge 
the  trust  scheme  of  its  illegality,  and  it  remains 
as  essentially  opposed  to  the  principles  of  sound 
public  policy  as  when  the  trust  was  in  existence. 
It  was  illegal  before  and  is  illegal  still  and  for  the 
same  reasons.^' 

The  evils  and  dangers  of  trusts  and  monopo- 
lies are  thus  described  by  the  Supreme 
Court  of  the  State  of  Ohio  in  the  case  of  the  State 
vs.  the  Standard  Oil  Company,  49  Ohio  State  Re- 
ports, page  137.  "Its  object  was  to  establish  a 
virtual  monopoly  of  the  business  of  producing  pe- 
troleum, and  of  manufacturing,  refining,  and  deal- 
ing in  it  and  all  its  products,  throughout  the  entire 
country,  and  by  which  it  might  not  merely  control 


136  Combinations, 

the  production,  but  the  price,  at  its  pleasure.  All 
such  associations  are  contrary  to  the  policy  of  our 
state  and  void.     .     .     .'* 

Much  has  been  said  in  favor  of  the  objects 
of  the  Standard  Oil  Trust,  and  what  it  has  ac- 
complished. It  may  be  true  that  it  has  improved 
the  quality  and  cheapened  the  costs  of  petroleum 
and  its  products  to  the  consumer.  But  such  is  not 
one  of  the  usual  or  general  results  of  a  monopoly 
and  it  is  the  policy  of  the  law  to  regard,  not 
what  may,  but  what  usually,  happened.  Experi- 
ence shows  that  it  is  not  wise  to  trust  human  cupid- 
ity where  it  has  the  opportunity  to  aggrandize 
itself  at  the  expense  of  others.  .  .  .  It  is  true 
that  in  the  case  just  cited,  the  monopoly  had  been 
created  by  letters  patent.  But  the  objections  lie 
not  to  the  manner  in  which  tlie  monopoly  is  cre- 
ated. The  effect  on  industrial  liberty  and  the  price 
of  commodities  will  be  the  same  whether  created  by 
patent,  or  by  an  extensive  combination,  among  those 
engaged  in  similar  industries,  controlled  by  one 
management.  By  the  invariable  laws  of  human 
nature,  competition  will  be  excluded  and  prices 
controlled  in  the  interest  of  those  connected  with 
the  combination  or  trust. 

The  power  and  far  reaching  effects  of  combi- 
/nations  and  monopolies  are  thus  set  forth  by  the 
Supreme  Court  of  the  State  of  Pennsylvania  in  the 
case  of  the  Morris  Kun  Coal  Company  vs.  the 
Barcky  Coal  Company,  68  Pennsylvania  State 
Heports,  page  173. 

**The  effects  produced  on  the  public  interests  lead 
to  the  consideration  of  another  feature  of  great 
weight  in  determining  the  illegality  of  the  con- 


Trusts  and  Monopolies.  137 

tract,  to  wit :  the  combination  resorted  to  by  these 
five  companies.  Singly,  each  might  have  sus- 
pended deliveries  and  sales  of  coal  to  suit  its  own 
interests  and  might  have  raised  the  price,  even 
though  this  might  be  detrimental  to  the  public 
interest.  There  is  a  certain  freedom  which  must 
be  allowed  to  every  one  in  the  management  of  his 
own  affairs.  WTien  competition  is  left  free,  indi- 
vidual error  or  folly  will  generally  find  a  correc- 
tion in  the  conduct  of  others.  But  here  is  a  com- 
bination of  all  the  companies  operating  in  the 
■Blosburg  and  Barclay  mining  region,  and  con- 
trolling their  entire  productions.  They  have 
combined  together  to  govern  the  supply  and 
price  of  coal  in  all  the  markets  from  the 
Hudson  to  the  Mississippi  rivers,  and  from 
Pennsylvania  to  the  Lakes.  This  combination 
has  a  power  in  its  confederated  form  which 
no  individual  action  can  confer.  The  public 
interest  must  succumb  to  it,  for  it  has  left  no  com- 
petition free  to  correct  its  baleful  influence.  When 
the  supply  of  coal  is  suspended,  the  demand  for  it 
becomes  importunate,  and  prices  must  rise.  Or  if 
the  supply  goes  forward,  the  price  fixed  by  the  con- 
federates must  accompany  it.  The  domestic 
hearth,  the  furnace  of  the  iron  master,  and  the  fires 
of  the  manufactory, — all  feel  the  restraint,  while 
many  dependent  hands  are  paralyzed,  and  hungry 
mouths  are  stinted.  The  influence  of  a  lack  of 
supply  or  a  rise  in  the  price  of  an  article  of  such 
prime  necessity,  cannot  be  measured.  It  permeates 
the  entire  mass  of  the  community,  and  leaves  few 
of  its  members  untouched  by  its  withering  blight. 
Such  a  combination  is  more  than  a  contract:    it 


138  Combinations, 

IS  an  offense.  'I  take  it/  said  Gibson  J.,  'a  com- 
bination is  criminal  whenever  the  act  to  be  done 
has  a  necessary  tendency  to  prejudice  the  public 
or  to  oppress  individuals  by  unjustly  subjecting 
them  to  the  power  of  the  confederates,  and  giving 
effect  to  the  purpose  of  the  latter  whether  of  ex- 
tortion or  of  mischief: — Commonwealth  vs.  Car- 
lisle, Brightly's  Reports,  40.'  In  all  such  combina- 
tions where  the  purpose  is  injurious  or  unlawful, 
the  gist  of  the  offense  is  the  conspiracy.  Men  can 
often  do  by  the  combination  of  many,  what  sever- 
ally no  one  could  accomplish,  and  even  what  when, 
done  by  one  would  be  innocent.'' 

The  primary  effect  of  these  and  similar  decisions 
has  been  to  compel  a  general  recognition  of  the  fact 
that  combinations  in  restraint  of  trade  are  viola- 
tions of  the  common  law,  and  may  be  dissolved  and 
punished  by  the  imposition  of  whatever  penalties 
statutes  may  provide.  Their  secondary  effect  has 
been  to  dissolve  numerous  combinations  formed  in 
various  parts  of  the  country  for  the  purpose  of 
controlling  certain  lines  of  trade.  The  first  of 
these  serves  to  put  combinations  on  their  guard 
lest  they  overreach  the  point  of  public  toleration, 
and  this  is  likely  to  prove  more  effective  in  re- 
straining the  abuse  of  power  by  combinations  in 
the  future  than  any  of  the  statutes  which  have  yet 
been  enacted.  The  second  of  these  effects,  however, 
or  the  dissolution  of  combinations  which  these  de- 
cisions have  effected,  has  merely  served  to  drive 
these  unlawful  trusts  and  combinations  from  cover 
to  cover,  and  most  of  them  have  continued  under 
new  forms  of  organization,  to  build  up  their  mo- 
nopoly of  trade  in  defiance  of  law. 


Trusts  and  Monopolies.  139 

It  may  then  be  asked,  if  it  is  unlawful  to  corn- 
Line  under  one  form  of  organization,  why  fs  it  not 
equally  unlawful  to  combine  under  any  other  ?  To 
this  we  must  reply,  that  no  real  distinction  can  be 
made;  whatever  is  wrong  under  one  form  of  or- 
ganization is  equally  wrong  under  any  other,  no 
matter  what  appearance  of  regularity  may  be 
adopted  to  disguise  it;  and  if  it  were  not  for  the 
division  of  this  country  into  so  many  independent 
state  governments,  the  application  of  this  rule 
would  be  very  simple,  as  was  shown  in  the  case  of 
the  Distilling  and  Cattle  Feeding  Company  versus 
The  People,  in  the  Supreme  Court  of  the  State  of 
Illinois:  but  an  undue  regard  for  the  rights  and 
privileges  of  corporations,  together  with  a  conven- 
tional respect  for  the  acts  of  other  states,  has,  in  a 
measure,  served  to  tie  the  hands  of  the  courts  and 
to  limit  their  application  of  this  general  principle, 
and  many  offenders  have  thus  been  enabled  to  evade 
the  law  by  merely  assuming  the  garb  of  regularity. 

The  situation  which  confronts  the  courts  in  this 
matter  is  about  as  follows:  most  of  the  states,  as 
has  already  been  stated,  have  enacted  statutes  de- 
claring all  pools,  trusts,  confederations,  or  combina- 
tions formed  for  the  purpose  of  fixing  and  con- 
trolling prices  or  of  regulating  or  limiting  the 
production,  sale,  or  distribution  of  any  article  of 
merchandise  or  other  commodity,  to  be  illegal,  and 
prescribing  severe  penalties  to  be  imposed  upon 
those  who  shall  be  found  guilty  of  entering  into 
fiuch  combinations.  Other  states  have  not  adopted 
this  policy  of  opposition  to  combinations  and  seem 
rather  to  encourage  the  formation  of  just  such 
combinations  of  capital  as  the  majority  of  the  states 


140  Combinations, 

are  striding  to  prevent.  When,  therefore,  offenders 
'against  these  statutes  have  been  brought  before  the 
courts,  many  attempts  have  been  made  to  enforce 
their  provisions,  and  numerous  combinations  have 
been  dissolved  or  seriously  disabled,  but  they  have 
in  most  cases  immediately  taken  refuge  under  the 
laws  of  those  states  which  are  known  to  be  friendly 
to  their  purposes,  and  have  continued  to  do  busi- 
ness as  before,  as  in  the  case  of  the  Distilling  and 
Cattle  Feeding  Company  of  America. 

This  company  was  declared  by  the  Supreme 
Court  of  the  State  of  Illinois  to  be  illegal,  and 
ordered  to  be  dissolved.  The  members  of  the  com- 
pany immediately  sent  their  agents  to  the  State 
of  Xew  York,  incorporated  the  American  Spirits 
Manufacturing  Company,  came  back  to  the  State 
of  Illinois  as  a  legally  organized  foreign  corpora- 
tion, bought  out  the  properties  of  the  Distilling 
and  Cattle  Feeding  Company,  and  proceeded  to 
carry  on  its  business  in  the  State  of  Illinois  just  as 
before.  The  powers  of  this  new  corporation  were 
derived  from  the  State  of  New  York,  and  the 
legality  of  its  corporate  existence  could  not  there- 
fore be  inquired  into  by  the  courts  of  the  State  of 
Illinois.  The  laws  of  the  State  of  Illinois  permit 
foreign  corporations  to  do  business  within  the  state 
upon  very  easy  terms,  and  the  courts,  therefore, 
found  themselves  helpless  to  interfere  further  with 
the  affairs  of  this  company. 

In  the  State  of  New  York,  the  North  Kiver  Su- 
gar Refining  Company,  one  of  the  members  of  the 
Sugar  Trust,  was  attacked  in  the  courts  of  that 
state,  and  its  participation  in  the  trust  was  de- 
clared illegal,  and  the  company  ordered  to  be  dis* 


Trusts  and  Monopolies.  1411 

solved.  The  Sugar  Trust  simply  went  into  the 
State  of  New  Jersey,  incorporated  the  American 
Sugar  Eefining  Compan}^,  assumed  the  properties 
of  the  Trust,  and  continued  to  do  business  as  of 
old,  in  the  State  of  New  York. 

In  the  State  of  Ohio  one  of  the  members  of  the 
Standard  Oil  Trust- was  brought  before  the  Su- 
preme Court  of  that  state,  and  its  connection  with 
the  trust  was  declared  to  be  illegal,  and  a  disso- 
lution of  its  relations  ordered;  but  after  defying 
the  decisions  of  the  courts  of  that  and  other  states 
for  a  number  of  years,  the  Standard  Oil  Trust 
finally  went  into  the  State  of  New  Jersey  and  in- 
corporated the  Standard  Oil  Company,  since  which 
time  it  has  continued  to  operate  its  plants  just  as 
before. 

But  why,  it  may  now  be  asked,  do  trusts  and  com- 
binations which  have  been  dissolved,  or  which  are 
about  to  be  organized,  usually  go  to  some  one  of 
a  certain  few  states  to  secure  their  articles  of  in- 
•corporation,  and  frequently  to  states  in  which  but 
little  or  none  of  their  business  is  to  be  carried  on? 
The  experience  of  the  cases  just  cited  would  seem 
to  suggest  one  answer  to  this  question,  which  is,  that 
the  purposes  of  the  organization,  in  its  trust  form, 
having  been  declared  to  be  contrary  to  the  policy 
of  the  common  law,  the  probabilities  are  that  the 
courts  of  the  same  state  would  hold  the  same  pur- 
poses on  the  part  of  a  corporation  to  be  equallyj 
obnoxious  to  the  law,  and  warrant  the  dissolution 
of  the  corporation  just  as  it  had  that  of  the  trust 
or  other  combination ;  whereas,  by  going  for  their 
charter  to  a  state -in  which  they  have  but  little,  or  no 
business,  the  people  of  that  state  will  have  but 


ii42  Combinations, 

little  interest  in  the  conduct  of  their  affairs,  and 
there  will,  therefore,  be  but  slight  danger  of  their 
legal  existence  being  challenged  on  account  of  any 
abuse  of  corporate  powers  of  which  they  may  be 
guilty. 

A  more  fundamental  reason,  however,  is  found 
in  the  nature  of  our  corporation  laws.  It  has  been 
the  policy  of  the  common  law  from  the  earliest 
times  to  resist  every  extension  of  the  powers  of 
associations  or  corporations.  In  the  early  days  of 
English  civilization,  land  was  the  chief  source 
of  wealth  and  power,  and  we  therefore  find  among 
the  first  restrictions  placed  upon  associations,  stat- 
intes  limiting  their  power  to  acquire  and  hold  land. 
These  statutes  date  as  far  back  as  the  Magna 
Charta,  of  the  ninth  year  of  the  reign  of  Henry  the 
Third,  in  the  year  1225,  and  from  that  time  until 
the  present  day,  restrictions  upon  the  amount  of 
Teal  estate  to  be  held  by  them,  have  continued  to 
be  one  of  the  limitations  most  invariably  placed 
■upon  the  powers  of  corporations. 

Many  changes  in  the  manner  of  creating  corpora- 
tions and  in  the  regulations  to  be  imposed  upon 
them,  have  been  made  with  the  changing  conditions 
and  requirements  of  each  successive  age;  but  the 
same  general  principle  seems  always  to  have  been 
kept  in  mind,  namely,  that  corporations  should  al- 
ways be  strictly  limited  to  the  exercise  of  those 
powers  which  are  reasonably  necessary  to  the  dis- 
charge of  the  purposes  of  their  creation.  In  con- 
etruing  these  statutes  in  relation  to  corporations^ 
ithe  courts  have  generally  borne  in  mind 
the  popular  distrust  of  the  growth  of  cor- 
porate   powers,    and    their    decisions    have  built 


Trusts  and  Monopolies.  143 

up  a  mass  of  common  law  prescribing  what 
corporations  shall  not  do,  which,  in  connection 
,with  the  statutory  provisions  as  to  what  they 
may  do,  would  seem  to  require  them  to  move  in  a 
straight  and  narrow  way.  This  same  spirit  of  an- 
tagonism, modified  somewhat  by  experience  and  by 
a  more  general  knowledge  of  the  affairs  of  corpora- 
tions which  has  been  obtained  during  the  last  half 
century,  but  adhering  to  the  precedents  laid  down 
by  the  courts,  and  true  to  that  innate  suspicion  of 
the  accumulation  of  great  power  in  the  hands  of  a 
few  individuals,  still  pervades  the  corporation  laws 
of  most  of  the  states  of  this  country. 

While  this  spirit  of  opposition  to  the  extension 
of  the  powers  of  corporations  has  been  the  prevail- 
ing sentiment  in  the  corporation  laws  of  America 
and  England  for  the  last  six  or  eight  hundred 
years,  and  has  only  been  modified  in  recent  times 
into  a  feeling  of  vigilant  toleration,  there  has  grown 
.up  in  some  parts  of  this  country  within  the  last 
twenty-five  or  thirty  years  a  disposition  to  give 
to  corporations  almost  unrestricted  powers;  to  al- 
low them  substantially  the  same  liberty  of  action 
as  is  enjoyed  by  individuals,  while  relieving  them 
of  the  responsibilities  and  penalties  to  which  an 
individual  would  be  subject,  and  statutes  extend- 
ing to  corporations  a  large  share  of  this  freedom 
and  power  of  action  have  been  enacted  in  some  of 
our  states. 

Under  these  statutes  a  corporation  may  obtain 
a  charter  empowering  it  to  carry  on  any  or  all 
of  the  various  branches  of  business  known  to  the 
business  world,  with  a  very  few  exceptions,  such  as 
banking,  insurance,  and  the  operation  of  certain 


144  Combinations, 

franchises,  and  to  do  all  things  necessary  to  the 
fiuccessful  prosecution  of  these  various  pursuits. 
These  powers  may  all  be  included  in  one  charter, 
and  under  it  the  corporation  may  consolidate  and 
combine  with,  or  absorb  other  companies,  or  may 
hold  and  vote  their  stock,  thus  controlling  their 
ajffairs;  it  may  be  practically  unrestricted  as  to 
its  holding  of  real  estate,  at  least  outside  of  the 
gtate  of  its  creation;  may  issue  an  unlimited 
amount  of  bonds  or  other  securities;  may  reside 
partially  or  wholly  outside  of  the  state  of  its  cre- 
ation, by  merely  retaining  a  nominal  office  within 
its  jurisdiction,  and  may  escape  many  liabilities 
and  restraints  to  which  the  directors  of  corpora- 
tions are  ordinarily  subjected.  Many  of  these  priv- 
ileges are  denied  to  corporations  by  the  laws  of 
most  of  our  states,  and  we  therefore  find  a  great 
number  of  the  very  large  corporations  and  com- 
binations going  for  their  articles  of  incorporation 
to  the  State  of  New  Jersey,  and  other  states  and 
territories  which  have  patterned  after  its  laws, 
no  matter  in  what  states  their  business  may  be 
located. 

We  shall  not  attempt  to  determine  what  were 
the  controlling  motives  which  induced  the  growth 
of  this  unprecedented  liberality  which  has  made 
the  State  of  New  Jersey  so  conspicuous  as  the 
home  of  great  corporations.  Whether  the 
people  of  that  state  have  been  more  progres- 
sive in  their  views  or  have  been  more  sen- 
sible to  the  progressive  spirit  of  the  age,  which 
may  have  seemed  to  demand  the  adoption  of  a  more 
liberal  policy  toward  corporations;  or  whether  the 
■business  interests  of  the  state  seemed  to  require 


Trusts  and  Monopolies.  1451 

that  greater  powers  be  given  to  corporations  in. 
order  to  enable  them  to  meet  the  requirements  of 
the  industrial  world,  the  .control  of  which  was  so 
rapidly  concentrated  into  their  hands ;  whether  the 
people  wished  to  attract  a  larger  share  of  the  busi- 
ness of  the  country  into  their  state;  or  whether 
for  the  sake  of  the  fees  to  be  obtained  for  the  sale 
of  corporate  charters,  they  were  willing  to  prey 
upon  the  business  interests  of  their  sister  states, 
and  to  enable  large  aggregations  of  capital  to  defy 
the  laws  of  the  states  in  which  their  business  was 
actually  situated  and  carried  on,  we  shall  not  at- 
tempt to  say.  There  are,  however,  a  few  points 
which  serve  to  make  the  prominence  of  this  state 
as  a  refuge  for  large  corporations  appear  par- 
ticularly remarkable. 

New  Jersey  is  not  the  largest  state  in  the 
Union  in  any  respect.  In  point  of  population 
it  ranks  sixteenth  in  size;  in  regards  to  its 
agricultural  products  it  ranks  as  thirtieth 
among  the  states,  and  as  a  manufacturing 
state  it  takes  sixth  place;  while  as  an  in- 
corporator of  combinations  and  large  corporations 
it  far  surpasses  all  the  other  states.  Of  the  one 
hundred  and  eighty-five  industrial  combinations 
reported  by  the  Twelfth  Census,  and  reproduced 
elsewhere  in  this  volume,  one  hundred  and  one 
were  incorporated  in  the  State  of  New  Jersey, 
seventy-six  were  distributed  among  nineteen  or 
twenty  other  states,  and  eight  of  the  number  were 
incorporated  under  the  laws  of  England. 

Some  idea  of  what  percentage  of  the  corpora- 
tions incorporated  under  the  New  Jersey  laws  are 
actual  bona  fide  residents  of  that  state  may  be 


1146  Combinations, 

derived  from  an  inspection  of  the  census  table  jxL&t 
referred  to,  from  which  it  appears  that  of  the 
one  hundred  and  one  combinations  incorporated 
in  the  State  of  New  Jersey,  only  four  reported  to 
the  Director  of  the  Census  that  their  central  or 
principal  offices  were  located  in  that  state,  while 
ninety-seven  reported  that  their  offices  were  situ- 
ated at  points  in  other  states. 

It  is  true  that  the  laws  of  New  Jersey  provide 
that  every  corporation  incorporated  in  that  state 
shall  maintain  a  principal  office  within  the  state, 
but  this  requirement  is  complied  with  by  merely 
maintaining  a  nominal  agency  at  some  point 
within  the  state,  at  which  certain  books  are  kept, 
but  where  no  real  business  is  transacted.  It  will 
be  readily  understood  how  complete  a  sham  this 
fiction  of  maintaining  a  principal  office  within 
the  state  is,  when  it  is  known  that  several  trust 
companies  within  the  state  make  a  special  business 
of  organizing  non-resident  corporations,  and  of 
maintaining  their  principal  offices  for  them.  One 
of  these  companies  alone  claims,  in  its  advertising 
circular,  to  represent  over  two  thousand  corpora- 
tions, so  it  can  easily  be  imagined  how  much  real 
business  it  would  be  capable  of  conducting  for 
each  one  of  them. 

These  companies  advertise  all  over  the  country 
the  advantages  afforded  by  the  New  Jersey  laws. 
,They  agree  to  furnish  resident  incorporators  in 
order  to  organize  corporations  for  any  purpose  or 
purposes  that  may  be  desired ;  to  fill  out  and  sign 
all  necessary  applications,  and  to  take  out  all 
papers  necessary  to  complete  organization;  to  hold 
all    necessary    meetings,    to    keep    the    necessary 


Trusts  and  Monopolies.  147 

books,  to  hold  the  annual  meetings  of  stockholders 
which  are  required  to  be  held  within  the  state; 
all  of  this  without  the  presence  of  a  single  stock- 
holder, and  finally  to  insure  the  corporation  against 
all  liabilities  and  penalties  under  the  laws  of  that 
state.  In  short,  they  propose  to  organize,  equip 
and  deliver  to  the  customer  a  complete  working 
corporation  endowed  with  exceptional  powers  and 
privileges,  and  that  without  a  member  of  the  new 
corporation  ever  having  put  his  foot  within  the 
state,  or  subjected  himself  to  its  jurisdiction.  Yet 
this  appears  to  be  accepted  by  the  courts  as  a  com- 
pliance with  the  laws  of  the  state. 

The  fees  derived  from  the  issuing  of  charters  to 
this  multitude  of  corporations  have,  however, 
proved  to  be  the  source  of  a  very  considerable 
revenue  to  the  state,  and  have  greatly  reduced  the 
rate  of  taxation.  The  people  of  that  state  have, 
therefore,  received  some  direct  benefit  as  the  result 
of  their  liberality  toward  corporations,  and  it  is 
easy  to  understand  why  they  might  favor  the  ex- 
tension of  the  trade  in  corporation  charters,  re- 
gardless of  what  the  effect  might  be  upon  the  busi- 
ness interests  of  other  states. 

Whatever  may  have  been  the  motives  which  in- 
spired the  f ramers  of  the  corporation  laws  of  New 
Jersey,  whether  they  were  selfish  and  narrow,  or 
as  generous  and  broad  as  their  effects  have  been 
far-reaching,  the  fact  remains  that  they  have  revo- 
lutionized corporation  life  in  this  country.  A  large 
majority  of  the  states  still  adhe^-e  to  the  old  form 
of  strict  corporation  laws,  but  the  promoters  of 
corporations  understand  perfectly  well  that  when- 
ever they  desire  to  secure  greater  freedom  of  cor- 


148 


Combinations, 


porate  powers  than  the  laws  of  the  state  in  which 
they  are  doing  business  afford,  they  have  merely 
to  apply  to  the  State  of  New  Jersey  or  to  some 
other  state  having  similar  laws,  for  a  charter  em- 
powering them  to  do  almost  anything  that  they 
might  wish  to  do. 

The  anti-trust  statutes  adopted  by  most  of  the 
states,  and  designed  to  prevent  the  formation  of 
pools,  trusts  and  agreements  for  the  control  of 
prices  and  the  regulation  of  production,  have  been 
successful  in  driving  these  aggregations  of  capital 
from  one  form  of  organization  to  another,  until 
they  at  last  found  refuge  and  protection  in  the 
form  of  great  corporations,  or  what  might  very  ap- 
propriately be  termed,  foreign  corporations,  for 
they  are  usually  foreign  to  all  states  in  which  their 
business  is  conducted.  The  development  of  this 
idea  of  a  foreign  corporation  has  rendered  the  old 
forms  of  trusts,  pools  and  working  agreements^ 
much  less  desirable  means  of  forming  combina- 
tions, and  the  statutes  directed  against  them  have 
therefore  lost  much  of  their  value  as  a  means  of 
protection  to  the  rights  of  the  people. 

In  order  to  place  some  restriction  upon  the 
powers  of  these  foreign  corporations,  some  states 
have  enacted  provisions  requiring  all  foreign  cor- 
porations desiring  to  do  business  within  their 
limits  to  file  a  copy  of  their  charter  or  certificate 
of  incorporation  with  the  Secretary  of  State  or 
other  official,  to  become  subject  to  the  general  cor- 
poration laws  of  the  state,  and  declaring  that  they 
shall  exercise  no  other  or  greater  powers  within 
its  jurisdiction  than  are  conferred  upon  the  domes- 
tic corporations  of  the  state.     These  provision^ 


Trusts  and  Monopolies.  149 

though  they  may  at  first  sight  appear  to  be  amply 
sufficient  to  restrain  the  powers  of  these  corpora^ 
tions  within  the  state,  have  fallen  wholly  short  of 
their  purpose.  The  plants  operated  by  these  cor- 
porations within  the  state  are  usually  found  to  be 
mere  ministerial  branches,  exercising  no  executive 
powers,  operated  in  obedience  to  orders  received 
from  the  board  of  directors,  the  members  of  which 
are  usually  found  to  reside  in  some  other  state,  and 
the  result  has  been  an  utter  failure  to  check  them 
in  any  essential  particular. 

An  illustration  of  this  class  of  cases  is  found  in 
the  case  of  the  American  Spirits  Manufacturings 
Company,  which  owns  and  operates  a  number  of 
distilleries  in  the  State  of  Illinois  as  well  as  in 
tother  states.  This  company  is  incorporated  under 
the  laws  of  the  State  of  New  York,  but  ninety 

II  per  cent,  of  its  stock  is  owned  by  the  Distilling 
I  Company  of  America,  which  is  a  New  Jersey  cor- 
I  poration,  and  which  therefore  controls  its  affairs. 
We  then  have  a  distillery  operated  at  Peoria,  Illi- 
nois, but  its  supplies  are  purchased  and  its  products 
distributed  by  the  American  Spirits  Manufactur- 
ing Company  of  New  York,  under  the  direction 
of  the  Distilling  Company  of  America,  of  New 
Jersey. 
1 1     Perhaps  the  most  convincing  evidence  of  the 
j  I  failure   of   these   restrictive  provisions   to   accom- 
1 1  plish  their  purpose  is  found  in  the  steady  and  rapid 
i  j  increase  in  the  number  and  power  of  these  foreign 
corporations.     If  these  corporations  found  them- 
selves restricted  in   any  considerable  number  of 
states  to  the  exercise  of  those  powers  and  privileges 
which  are  enjoyed  by  domestic  corporations,  and 


150  Combinations, 

which  is  the  end  these  statutes  were  intended  to 
secure,  it  would  be  useless  for  them  to  go  to  Xew 
Jersey  or  elsewhere  to  procure  the  grant  of  powers 
which  they  would  not  be  allowed  to  exercise.  There 
would  soon  be  a  perceptible  falling  off  in  the  num- 
ber of  organizations  seeking  charters  in  foreign 
states,  but  their  number  is  steadily  increasing,  and 
we  are  therefore  forced  to  conclude  that  they  must 
find  but  very  little  hindrance  to  the  exercise  of 
these  extraordinary  powers  for  which  they  seek 
the  aid  of  foreign  states. 

It  would  seem,  then,  that  the  several  states 
should  either  adopt  some  drastic  measures  to  com- 
pel these  foreign  corporations  to  abandon  their 
extraordinary  powers,  or  should  revise  their  own 
laws  so  as  to  allow  to  domestic  corporations  a  de- 
gree of  latitude  in  keeping  with  the  demands  of  the 
age,  and  should  endeavor  to  agree  upon  some  uni- 
form provisions  for  their  regulation  and  control. 
It  certainly  seems  absurd  to  see  corporations  going 
to  one  state  to  secure  their  grant  of  powers,  and 
then  going  into  other  states  to  exercise  them.  It  is 
a  burlesque  upon  our  form  of  government. 

The  reason  of  the  restrictions  which  the  com- 
mon law  and  the  statutory  laws  of  most  of  our 
states  have  thrown  about  corporations,  is  that  it 
has  always  been  believed  that  if  too  much  freedom 
of  action  were  to  be  allowed  to  corporations  they 
would  soon  become  so  powerful  as  to  be  a  menace 
to  the  interests  of  the  public,  and  destructive  of 
the  rights  of  individual  competitors.  If  experi- 
ence has  shown  the  correctness  of  this  position  to 
be  still  well  founded,  and  it  has  been  found  im- 
practicable to  restrain  these  foreign  corporations 


Trusts  and  Monopolies.  151! 

by  imposing  regulations  upon  their  branches  within 
the  state,  there  would  seem  to  be  no  good  reason 
why  they  should  not  be  absolutely  prohibited  from 
doing  business  within  the  state,  so  far  at  least  as 
such  business  does  not  become  a  part  of  interstate 
commerce,  for  every  state  has  the  right  to  protect 
the  interests  of  its  own  people  by  all  measures 
which  do  not  interfere  with  the  powers  which  are 
granted  to  the  national  government  by  the  Con- 
stitution of  the  United  States,  and  no  state  has 
any  right  to  grant  a  license  to  any  individual  or 
corporation  to  do  any  act,  or  exercise  any  powers 
within  the  limits  of  any  other  state,  which  are  not 
tolerated  by  the  laws  of  that  state,  or  which  it  is 
bound  to  respect. 

In  view  of  the  many  changes  which  have  taken 
place  in  the  condition  of  society  and  in  the  man- 
ner of  doing  business,  and  in  the  light  of  the 
numerous  experiments  which  have  been  made  in 
the  exercise  of  extensive  powers  by  corporations,  if 
it  appears  that  greater  powers  and  freedom  of  ac- 
tion are  necessary  to  enable  corporations  to  meet 
the  legitimate  requirements  of  the  business  of  to- 
day, and  that  it  can  be  safely  granted  to  them 
without  sacrificing  the  rights  of  the  public  or  of 
the  individual,  it  would  seem  to  be  the  part  of  wis- 
dom for  the  states  to  revise  their  laws,  and  to 
grant  to  corporations  whatever  measure  of  free- 
dom the  industrial  development  of  the  country 
may  seem  to  demand.  An  effort  should  also  be 
made  to  secure  uniformity  in  the  corporation  laws 
of  the  several  states,  for  in  that  way,  not  only 
would  the  powers,  privileges,  penalties  and  im- 
munities of  corporations  become  more  generally 


152  Combinations, 

iinderstoocl,  but  corporations  would  then  secure 
their  charters  from  the  state  in  which  they  intend 
to  do  business  and  in  which  their  property  is  lo- 
cated, and  there  would  cease  to  be  displayed  that 
disposition  to  seek  to  secure  the  extreme  limit  of 
power  which  must  always  result  from  an  undue 
restriction  on  the  one  hand  and  an  over-indulgence 
on  the  other.  But  we  shall  speak  further  of  thid 
when  we  come  to  the  consideration  of  remedies. 

The  difficulties  attending  the  regulation  of  trusts 
and  combinations  by  the  several  states,  early  led  to 
an  appeal  to  the  national  government  to  take  the 
matter  in  hand,  and  in  obedience  to  the  popular 
demand,  Congress,  in  the  year  1890,  passed  what 
is  commonly  known  as  the  Sherman  Anti-Trust 
'Act. 

As  is  generally  understood,  the  Government  of 
the  United  States  is  limited  to  the  exercise  of 
those  powers  which  are  granted  to  it  by  the  Con- 
stitution of  the  United  States,  and  in  order  to 
secure  its  action  in  any  given  matter,  the  subject 
must  be  brought  fairly  within  the  scope  of  some 
one  of  these  powers.  Trusts,  pools  and  combina- 
,tions  among  railway  coliipanies  were  a  direct  in- 
terference with  interstate  commerce,  and  had  been 
provided  against  by  the  establishment  of  the  Inter- 
state Commerce  Commission  in  1887,  but  the  com- 
binations now  complained  of  were  chiefly  among 
manufacturers,  and  there  is  nothing  in  the  Con-<  i 
stitution  of  the  United  States  which  directly  gives!  n 
to  Congress  any  control  whatever  over  manufac-' 
tures. 

The  clause  of  the  Constitution  which  provides 
that  Congress  shall  have  power  to  regulate  com- 


Trusts  and  Monopolies.  153 

merce  with  foreign  nations  and  among  the  several 
states,  and  with  the  Indian  tribes,  has  been  con- 
■strned  to  include  the  power  to  levy  tariff  duties 
for  the  sole  purpose  of  affording  protection  to  do- 
mestic manufacturers,  but  this  has  been  justified 
chiefly  on  the  grounds  of  expediency,  because  the 
levying  of  duties  was  one  of  the  usual  means  of 
regulating  commerce ;  because  it  had  been  custom- 
ary under  English  law,  before  the  adoption  of  the 
Constitution,  to  levy  duties  for  the  protection  of 
domestic  industries;  because  the  power  to  afford 
such  protection  to  manufactures  or  other  industries 
had  been  taken  away  from  the  states  by  the  Con- 
stitution, and  because  it  was  believed  that  the 
framei^  of  the  Constitution  had  intended  that  such 
powers  should  be  exercised  by  Congress.  There  is 
no  other  power  enumerated  in  the  Constitution 
from  which  the  right  of  Congress  to  interfere  with 
combinations  of  manufacturers  can  possibly  be  de- 
rived. If  it  has  the  right  to  act  in  the  matter  at 
all,  its  authority  to  do  so  must  be  found  in  rela- 
tion to  the  interstate  commerce  clause  of  the  Con- 
etitution. 

It  was,  therefore,  considered  that  these  combina- 
^tions  would  most  likely  enter  into  agreements  which 
would,  in  one  way  or  another,  interfere  with  inter- 
state commerce,  and  upon  this  theory  the  Sherman 
act  was  founded.  It  prohibits  the  making  of  agree- 
ments of  any  kind  in  restraint  of  interstate  com- 
merce, believing  that  by  thus  restricting  the  power 
of  combinations  to  regulate  interstate  trade  they 
would  be  shorn  of  the  choicest  fruits  of  their  un- 
lawful combinations,  and  that  they  would  therefore 
goon  begin  to  disappear. 


154  Combinations, 

'^Chapter  647. — An  act  to  protect  trade  and  com- 
merce against  unlawful  restraints  and  monopolies, 
Jul^  2,  1890.  Be  it  enacted  by  the  Senate  and 
House  of  Representatives  of  the  United  States  of 
America  in  Congress  assembled. 

"Section  1.  Every  contract,  combination  in  theS 
form  of  trust  or  otherwise,  or  conspiracy,  in  re-  .. 
straint  of  trade  or  commerce  among  the  several 
states  or  with  foreign  nations,  is  hereby  declared 
to  be  illegal.  Every  person  who  shall  make  any 
such  contract  or  engage  in  any  such  combination 
or  conspiracy  shall  be  deemed  guilty  of  a  misde- 
meanor, and,  on  conviction  thereof,  shall  be  pun- 
ished by  a  fine  not  exceeding  $5,000,  or  by  im- 
prisonment not  exceeding  one  year,  or  by  both  said 
punishments,  in  the  discretion  of  the  Court." 

The  succeeding  sections  are  merely  amplifica- 
tions of  this,  together  with  the  provision  of  penal- 
ties for  its  violation,  and  prescribing  the  manner 
of  its  enforcement.  The  consideration  of  this 
statute  derives  special  importance  from  the  fact 
that  it  marks  the  utmost  extent  to  which  Congress 
has  yet  gone  in  this  direction. 

It  will  be  noticed  that  this  act  does  not  at- 
tempt to  assume  any  incidental  or  implied  power 
under  the  section  of  the  Constitution  relating  to 
the  regulation  of  interstate  commerce.  It  merely 
provides  that  no  trust  or  combination  shall  be 
formed  or  agreement  made  in  restraint  of  inter- 
state commerce ;  or,  in  other  words,  that  there  shall 
be  no  interference  with  that  which  Congress  has 
been  given  express  power  to  regulate.  It  does  not 
attempt  to  lay  hold  of  the  subject  matter  of  manu- 
facture, of  agriculture,  of  mining,  or  even  of  com- 


Trusts  and  Monopolies.  155 

merce  within  the  bounds  of  a  state ;  it  merely  pro- 
vides that  there  shall  be  no  interference  with  the 
free  flow  of  commerce  between  the  several  states. 
The  scope  of  the  Anti-Trust  Act,  and  the  powers 
joi  Congress  under  the  third  clause  of  section  eight, 
/of  article  one,  of  the  Constitution  of  the  United 
I  States,  which  provides  that  Congress  shall  have 
power  to  regulate  interstate  commerce,  are  very 
fully  considered  by  the  Supreme  Court  of  the 
United  States  in  the  case  of  the  United  States 
versus  E.  C.  Ejiight  Company,  156  United  States 
Eeports,  page  1,  in  which  attention  is  drawn  to 
the  distinction  between  commerce  and  manufac- 
ture, and  to  the  importance  of  observing  the  point 
at  which  the  jurisdiction  of  the  state  ends  and  that 
of  the  United  States  begins.  The  elements  com- 
prehended in  the  term  commerce  are  clearly  de- 
fined, and  the  dangers  and  far-reaching  conse- 
quences of  the  National  Government  ever  attempt- 
ing to  assume  control  of  those  who  may  be  engaged 
in  manufacturing  or  otherwise  producing  articles 
designed  for  interstate  commerce,  are  very  forcibly 
set  forth.  Chief  Justice  Fuller,  speaking  for  the 
Court  in  that  case,  says:  "The  argument  is  that 
the  power  to  control  the  manufacture  of  refined 
sugar  is  a  monopoly  over  a  necessary  of  life,  to 
the  enjoyment  of  which,  by  a  large  part  of  the 
population  of  the  United  States,  interstate  com- 
merce is  indispensable,  and  that,  therefore,  the 
general  government  in  the  exercise  of  the  power  to 
regulate  commerce  may  repress  such  monopoly  di- 
rectly and  set  aside  the  instruments  which  have 
created  it.  But  this  argument  cannot  be  con- 
fined to  necessaries  of  life  merely,  and  must  in- 

v/ 


156  Combinations, 

elude  all  articles  of  general  consumption.  Doubt- 
less the  power  to  control  the  manufacture  of  a 
given  thing  involves  in  a  certain  sense  the  control 
of  its  disposition,  but  this  is  a  secondary  and  not  the 
primary  sense;  and  although  the  exercise  of  that 
power  may  result  in  bringing  the  operation  of  com- 
merce into  play,  it  does  not  control  it,  and  affects 
it  only  incidentally  and  indirectly.  Commerce 
succeeds  to  manufacture,  and  is  not  a  part  of  it. 
The  power  to  regulate  commerce  is  the  power  to 
prescribe  the  rule  by  which  commerce  shall  be 
governed,  and  is  a  power  independent  of  the  power 
to  suppress  monopoly.  But  it  may  operate  in  re- 
.pression  of  monopoly  whenever  that  comes  within 
the  rules  by  which  commerce  is  governed,  or  when- 
ever the  transaction  is  itself  a  monopoly  of  com- 
merce. 

"It  is  vital  that  the  independence  of  the  commer- 
cial power  and  of  the  police  power,  and  the  de- 
limitation between  them,  however  perplexing, 
should  always  be  recognized  and  observed,  for, 
•while  the  one  furnishes  the  strongest  bond  of 
■union,  the  other  is  essential  to  the  preservation  of 
the  autonomy  of  the  states  as  required  by  our 
dual  form  of  government;  and  acknowledged 
evils,  however  grave  and  urgent  they  may  appear 
to  be,  would  better  be  borne  than  the  risk  be  run, 
in  the  effort  to  suppress  them,  of  more  serious  con- 
sequences, by  resort  to  expedients  of  even  doubtful 
constitutionality. 

"It  will  be  perceived  how  far-reaching  the 
proposition  is  that  the  power  of  dealing  with  a 
monopoly  directly  may  be  exercised  by  the  general 
government  whenever  interstate  or  international 


Trusts  and  Monopolies.  157 

commerce  may  be  ultimately  affected.  The  regula- 
tion of  commerce  applies  to  the  subjects  of  com- 
merce, and  not  to  matters  of  internal  police. 

"Contracts  to  buy,  sell,  or  exchange  goods  to  be 
transported  among  the  several  states,  the  trans- 
portation and  its  instrumentalities,  and  articles 
bought,  sold  or  exchanged  for  the  purposes  of  sucH 
transit  among  the  states  or  put  in  this  way  of 
transit  may  be  regulated,  but  this  is  because  they 
form  part  of  interstate  trade  or  commerce.  The 
fact  that  an  article  is  manufactured  for  export  to 
another  state  does  not  of  itself  make  it  an  article 
of  interstate  commerce,  and  the  intent  of  the  manu- 
facturer does  not  determine  the  time  when  the  ar- 
ticle or  product  passes  from  the  control  of  the  state 
and  belongs  to  commerce 

"If  it  be  held  that  the  term  includes  the  regu- 
lation of  all  such  manufactures  as  are  intended  to 
be  the  subject  of  commercial  transactions  in  the 
future,  it  is  impossible  to  deny  that  it  would  also 
include  all  productive  industries  that  contemplate 
the  same  thing.  The  result  would  be  that  Con- 
gress would  be  invested,  to  the  exclusion  of  the 
states,  with  the  power  to  regulate,  not  only  manu- 
factures, but  also  agriculture,  horticulture,  stock 
raising,  domestic  fisheries,  mining — in  short,  every 
branch  of  human  industry.  For  is  there  one  of 
them  that  does  not  contemplate,  more  or  less 
clearly,  an  interstate  or  foreign  market?  Does  not 
the  wheat  grower  of  the  Northwest,  or  the  cotton 
planter  of  the  South,  plant,  cultivate  and  harvest 
his  crop  with  an  eye  on  the  prices  at  Liverpool, 
New  York  and  Chicago?  The  power  being  vested 
in  Congress  and  denied  to  the  states,  it  would 


158      ^  Combinations, 

follow  as  an  inevitable  result  that  the  duty  would 
devolve  on  Congress  to  regulate  all  of  these  deli- 
cate, multiform  and  vital  interests — interests  which 
in  their  nature  are  and  must  be  local  in  all  the  de- 
tails of  their  successful  management." 

In  this  case  the  Court  held  that  in  order  to  come 
within  the  provisions  of  the  Sherman  Anti-Trust 
'Act,  a  contract  must  directly,  not  incidentally  or 
collaterally,  affect  interstate  commerce,  and  though 
the  contract  in  question  was  an  agreement  by  which 
a  sugar  refinery  which  had  heretofore  been  an  ac- 
tive competitor  of  the  Sugar  Trust,  was  to  become 
consolidated  with  the  trust ;  and  though  some  por- 
tion of  its  products  would  undoubtedly  eventually 
become  a  part  of  interstate  commerce,  yet  the  Court 
held  that  this  did  not  bring  the  case  within  the  pro- 
visions of  the  statute,  and  that  the  Court  had,^ 
jurisdiction  in  the  matter.  j 

The  fact  that  contracts  must  directly,  and  not 
merely  incidentally  or  collaterally,  affect  interstate 
commerce  in  order  to  come  within  the  provisions 
of  the  statute,  was  again  emphasized  in  the  Su- 
preme Court  of  the  United  States  by  Justice  Peck- 
ham,  in  the  case  of  the  Addyston  Pipe  &  Steel 
Company  versus  the  United  States,  175  Unitejd 
States  Reports,  page  211,  as  follows:  ^    ^, 

'Hinder  this  grant  of  power  to  Congress,  that 
»body,  in  our  judgment,  may  enact  such  legislation 
as  shall  declare  void  and  prohibit  the  performance 
of  any  contract  between  individuals  or  corpora- 
tions, where  the  natural  and  direct  effect  of  such 
a  contract  will  be,  when  carried  out,  to  directly, 
and  not  as  a  mere  incident  to  other  and  innocent 


^ 


Trusts  and  Monopolies.  159 

purposes,  regulate  to  any  substantial  extent  inter- 
state commerce." 

While  the  Sherman  Anti-Trust  Act  is  generally 
considered  to  be  the  limit  to  which  Congress  has 
gone  in  the  exercise  of  its  power  to  regulate  inter- 
state commerce,  and  undoubtedly  is  the  highest 
exercise  of  that  power  which  has  yet  been  attempted 
in  relation  to  measures  of  general  application,  there 
is  an  exception  to  be  found  in  the  case  of  the  Act 
of  March  2,  1895,  entitled,  "An  Act  for  the  Sup- 
pression of  Lottery  Traffic  through  National  and 
Interstate  Commerce  and  the  Postal  Service,  Sub- 
ject to  the  Jurisdiction  and  Laws  of  the  United 
States,"  28  Stat.,  963. 

The  purpose  and  eifect  of  the  act  is  to  ex- 
clude a  specific  article — lottery  tickets — from  in- 
terstate commerce  for  reasons  which  appear  to  be 
•in  no  way  related  to  that  commerce;  and  it  thus 
marks  a  distinct  departure  in  the  exercise  of  Fed- 
eral powers. 

The  constitutionality  of  the  act  was  not  con- 
tested until  the  year  1899,  when  proceedings  were 
begun  under  it  by  the  Federal  authorities  in  the 
State  of  Texas  against  one  C.  F.  Champion,  charg- 
ing him  with  sending  lottery  tickets  by  express 
from  some  point  in  that  state  to  a  point  in  the 
State  of  California.  An  appeal  was  taken,  and 
the  case  went  to  the  Supreme  Court  of  the  United 
States,  where  it  was  heard  at  the  October  term, 
1902,  and  the  opinion  sustaining  the  validity  of 
the  act  was  filed  February  23,  1903.  The  title 
of  the  case  now  is  Champion  versus  Ames,  United 
States  Marshal,  and  may  be  found  in  the  188th 
United   States  Report,  page  321. 


i6o  Combinations, 

Four  of  the  justices  dissented  from  the  finding 
of  the  Court,  only  five  concurring  in  it,  and  this, 
together  with  the  importance  of  the  subject  in- 
volved, the  new  and  radical  jcharacter  of  the  pro- 
visions of  the  act,  and  the  far-reaching  conse- 
quences which  might  be  supposed  to  follow  from  the 
establishment  of  such  a  precedent,  all  serve  to  mark 
it  as  a  decision  worthy  of  our  most  careful  con- 
sideration. After  discussing  the  various  elements 
which  go  to  make  up  commerce,  and  making  an  ex- 
haustive review  of  the  decisions  which  have  estab- 
lished the  meaning  of  that  term  as  used  in  the 
Constitution  of  the  United  States,  with  which  we 
are  not  now  concerned,  but  from  which  it  found 
that  lottery  tickets,  when  carried  from  state  to 
state,  properly  constitute  an  article  of  interstate 
commerce,  the  Court  continued  in  part  as  follows : 

"But  it  is  said  that  the  statute  in  question  does 
not  regulate  the  carrying  of  lottery  tickets  from 
state  to  state,  but  by  punishing  those  who  cause 
them  to  be  so  carried,  Congress  in  effect  prohibits 
such  carrying ;  that  in  respect  of  the  carrying  from 
one  state  to  another  of  articles  or  things  that  are, 
in  fact,  or  according  to  usage  in  business,  the  sub- 
jects of  commerce,  the  authority  given  Congress 
was  not  to  prohibit,  but  only  to  regulate.  This 
view  was  earnestly  pressed  at  the  bar  by  learned 
counsel  and  must  be  examined. 

"It  is  to  be  remarked  that  the  Constitution  does 
not  define  what  is  to  be  deemed  a  legitimate  regu- 
lation of  interstate  commerce.  In  Gibbons  versus 
Ogden  it  was  said  that  the  power  to  regulate  such 
commerce  is  the  power  to  prescribe  the  rule  by 
which  it  is  to  be  governed.    But  this  general  obser- 


Trusts  and  Monopolies.  i6il 

vation  leaves  it  to  be  determined,  when  the  ques- 
tion comes  before  the  court,  whether  Congress,  in 
prescribing  a  particular  rule,  has  exceeded  its 
power  under  the  Constitution.  While  our  govern- 
ment must  be  acknowledged  by  all  to  be  one  of 
enumerated  powers  (McCullough  versus  Maryland, 
4  Wheat.,  3 IG,  405,  407),  the  Constitution  does  not 
attempt  to  set  forth  all  the  means  by  which  such 
powers  may  be  carried  into  execution.  It  leaves 
to  Congress  a  large  discretion  as  to  the  means  that 
may  be  employed  in  executing  a  given  power.  'The 
sound  construction  of  the  Constitution,'  this  court 
has  said,  'must  allow  to  the  national  legislation 
that  discretion,  with  respect  to  the  means  by  which 
the  powers  it  confers  are  to  be  carried  into  execu- 
tion, which  will  enable  that  body  to  perform  the 
high  duties  assigned  to  it,  in  the  manner  most 
beneficial  to  the  people.  Let  the  end  be  legitimate ; 
let  it  be  within  the  scope  of  the  Constitution,  and 
all  means  which  are  appropriate,  which  are  plainly 
adapted  to  that  end,  which  are  not  prohibited,  but 
consist  with  the  letter  and  spirit  of  the  Con- 
stitution are  constitutional.'  lb.,  421. 

"If  a  state,  when  considering  legislation  for  the 
suppression  of  lotteries  within  its  own  limits,  may 
properly  take  into  view  the  evils  that  inhere  in  the 
raising  of  money,  in  that  mode,  why  may  not  Con- 
gress, invested  with  the  power  to  regulate  com- 
merce among  the  several  states,  provide  that  such 
commerce  shall  not  be  polluted  by  the  carrying  of 
lottery  tickets  from  one  state  to  another?  In  this 
connection  it  must  not  be  forgotten  that  the  power 
of  Congress  to  regulate  commerce  among  the 
states,  is  complete  in  itself,  and  is  subject  to  no 


i62  Combinations, 

limitations  except  such  as  may  be  found  in  the 
Constitution 

"As  a  state  may,  for  the  purpose  of  guarding 
the  morals  of  its  own  people,  forbid  all  sales  of 
lottery  tickets  within  its  limits,  so  Congress,  for 
the  purpose  of  guarding  the  people  of  the  United 
States  against  the  'widespread  pestilence  of  lot- 
teries' and  to  protect  the  commerce  which  concerns 
all  the  states,  may  prohibit  the  carrying  of  lottery 
tickets  from  one  state  to  another. 

"Tliat  regulation  may  sometimes  appropriately 
assume  the  form  of  prohibition  is  also  illustrated 
by  the  case  of  diseased  cattle,  transported  from  one 
state  to  another.  Such  cattle  may  have,  notwith- 
standing their  condition,  a  value  in  money  for  some 
purposes,  and  yet  it  cannot  be  doubted  that  Con- 
gress, under  its  power  to  regulate  commerce,  may 
either  provide  for  their  being  inspected  before 
transportation  begins,  or,  in  its  discretion,  may 
prohibit  their  being  transported  from  one  state 
to  another 

"The  act  of  July  2,  1890,  known  as  the  Sher- 
man Anti-Trust  Act,  and  which  is  based  upon  the 
power  of  Congress  to  regulate  commerce  among  the 
states,  is  an  illustration  of  the  proposition  that 
regulation  may  take  the  form  of  prohibition.  The 
object  of  that  act  was  to  protect  trade  and  com- 
merce against  unlawful  restraints  and  monopolies. 
To  accomplish  that  object,  Congress  declared  cer- 
tain contracts  to  be  illegal.  That  act,  in  effect, 
prohibited  the  doing  of  certain  things,  and  its  pro- 
hibitory clauses  have  been  sustained  in  several  cases 
as  valid  under  the  power  of  Congress  to  regulate 
interstate  commerce 


Trusts  and  Monopolies.  163 

''Then  followed  the  passage  by  Congress  of  the 
act  of  August  8,  1890,  26  Stat.  313,  C.  728,  pro- 
viding '^that  all  fermented,  distilled  or  other  intoxi- 
cating liquor  or  liquids  transported  into  any  state 
or  territory,  or  remaining  therein  for  use,  con- 
sumption, sale  or  storage  therein,  shall  upon  arrival 
in  such  state  or  territory  be  subject  to  the  opera- 
tion and  effect  of  the  laws  of  such  state  or  terri- 
tory enacted  in  the  exercise  of  its  police  powers,  to 
the  same  extent  and  in  the  same  manner  as  though 
tench  liquids  or  liquors  had  been  produced  in  such 
ftate  or  territory,  and  shall  not  be  exempt  there- 
from by  reason  of  being  introduced  therein  in  orig- 
inal packages  or  otherwise.'  That  act  was  sus- 
tained in  the  Eahrer  case  as  a  valid  exercise  of  the 
power  of  Congress  to  regulate  commerce  among  the 
states.     .     .     . 

"Thus  under  its  power  to  regulate  interstate 
commerce,  as  involved  in  the  transportation  in 
original  packages,  of  ardent  spirits  from  one  state 
to  another.  Congress,  by  the  necessary  effect  of  the 
act  of  1890  made  it  impossible  to  transport  such 
packages  to  places  within  a  prohibitory  state  and 
there  dispose  of  their  contents  by  sale;  although  it 
had  been  previously  held  that  ardent  spirits  were 
recognized  articles  of  commerce  and,  until  Con- 
gress otherwise  provided,  could  be  imported  into  a 
state,  and  sold  in  the  original  packages,  despite 
the  will  of  the  state.  If  at  the  time  of 
the  passage  of  the  act  of  1890,  all  the  states 
had  enacted  liquor  laws  prohibiting  the  sale  of  in- 
toxicating liquors  within  their  respective  limits, 
then  the  act  would  have  had  the  necessary  effect 

to  exclude  ardent  spirits  altogether  from  commerce 


164  Combinations, 

among  the  states ;  for  no  one  would  ship,  for  pur- 
pose of  sale,  packages  containing  such  spirits 
to  points  within  any  state  that  forbade  their  sale 
at  any  time  or  place,  even  in  unbroken  packages, 
and  in  addition,  provided  for  the  seizure  and  for- 
feiture of  such  packages.  So  that  we  have  in  the 
Eahrer  case  a  recognition  of  the  principle  that  the 
power  of  Congress  to  regulate  interstate  commerce 
may  sometimes  be  exerted  with  the  effect  of  ex- 
cluding particular  articles  from  such  commerce. 

"It  is  said,  however,  that  the  principle  that  in 
order  to  suppress  lotteries  carried  on  through  inter- 
state commerce.  Congress  may  exclude  lottery 
tickets  from  such  commerce,  leads  necessarily  to  the 
conclusion  that  Congress  may  arbitrarily  exclude 
from  commerce  among  the  states  any  article,  com- 
modity or  thing,  of  whatever  kind  or  nature,  or 
however  useful  or  valuable,  which  it  may  choose, 
no  matter  with  what  motive,  to  declare  shall  not  be 
carried  from  one  state  to  another.  It  will  be  time 
enough  to  consider  the  constitutionality  of  such 
legislation  when  we  must  do  so.  The  present  case 
does  not  require  the  Court  to  declare  the  full  ex- 
tent of  the  power  that  Congress  may  exercise  in 
the  regulation  of  commerce  among  the  states.  .  .  . 

"The  whole  subject  is  too  important,  and  the 
questions  suggested  by  its  consideration  are  too  dif- 
ficult of  solution  to  justify  any  attempt  to  lay 
down  a  rule  for  determining  in  advance  the  valid- 
ity of  every  statute  that  may  be  enacted  under  the 
commerce  clause.  We  decide  nothing  more  in  the 
present  case  than  that  lottery  tickets  are  subjects 
of  traffic  among  those  who  choose  to  sell  or  buy 
them;  that  the  carriage  of  such  tickets  by  inde- 


Trusts  and  Monopolies.  165 

pendent  carriers  from  one  state  to  another  is  there- 
fore interstate  commerce;  that  under  its  power  to 
regulate  commerce  among  the  several  states,  Con- 
gress, subject  to  the  limitations  imposed  by  the 
Constitution  upon  the  exercise  of  the  powers 
granted,  has  plenary  authority  over  such  commerce, 
and  may  prohibit  the  carriage  of  such  tickets  from 
state  to  state ;  and  that  legislation  to  that  end,  and 
of  that  character,  is  not  inconsistent  with  any  lim- 
itation or  restriction  imposed  upon  the  exercise  of 
the  powers  granted  to  Congress/' 

The  second  part  of  the  opinion  of  the  Court  was 
devoted  entirely  to  the  discussion  of  the  right  of 
Congress,  under  its  power  to  regulate  interstate 
commerce,  to  prohibit  the  carrying  of  any  particu- 
lar article  in  commerce  between  the  states,  for 
reasons  not  directly  connected  with  that  commerce. 
It  held  that  lottery  tickets  might  be  so  excluded 
from  interstate  commerce,  but  expressly  declined 
to  affirm  any  broader  rule  or  to  indicate  what  might 
be  held  in  the  case  of  a  similar  provision  applied 
to  any  other  article.  The  foregoing  extracts,  it  is 
believed,  present  the  principal  grounds  upon  which 
this  part  of  the  decision  was  founded.  In  the  dis- 
senting opinion  in  the  case  the  justices  avoided  any 
extended  discussion  of  the  constitutional  questions 
involved  and  dissented  from  the  finding  of  the 
Court  upon  the  grounds  that  lottery  tickets  do  not 
form  a  part  of  interstate  commerce,  but  in  view 
of  the  apparent  importance  of  the  decision  in  rela- 
tion to  the  exercise  by  Congress  of  powers  such  as 
■we  have  been  considering  in  this  chapter,  it  is  be- 
lieved that  a  few  remarks  concerning  it  will  not  be 
out  of  place  at  this  time. 


i66  Combinations, 

We  shall  examine  only  that  part  of  the  opinion 
which  deals  with  the  power  of  Congress  to  exclude 
articles  from  interstate  commerce.  It  should  be 
remembered,  then,  that  Congress  possesses  no 
powers  except  those  granted  to  it  by  the  Constitu- 
tion of  the  United  States,  and  those  which  are 
necessary  to  carry  them  into  effect ;  and  that  every 
act  of  Congress,  therefore,  to  be  declared  consti- 
tutional, must  be  brought  fairly  within  the  scope 
of  some  one  of  these  expressed  powers.  The  act 
in  question  was  clearly  intended  to  be  understood 
as  an  exercise  of  its  power  to  regulate  commerce 
among  the  states,  and  no  attempt  has  been  made 
to  justify  it  upon  any  other  grounds.  Let  us  see 
if  it  has  been  shown  to  fall  fairly  within  the  legiti- 
mate exercise  of  that  power.  The  court  repeats  the 
language  of  Chief  Justice  Marshall  to  the  effect 
that  the  power  of  Congress  to  regulate  commerce 
among  the  states  in  plenary,  is  complete  in  itself, 
and  that  the  power  to  regulate  such  commerce  is 
the  power  to  prescribe  the  rule  by  which  it  is  to  be 
governed.  It  then  remarks  that  these  general 
observations  leave  it  to  be  determined  when  the 
question  comes  before  the  Court  whether  Congress, 
in  prescribing  a  particular  rule,  has  exceeded  its 
power  under  the  Constitution.  The  general  state- 
ment that  Congress  has  complete  power  to  regu- 
late interstate  commerce  is,  then,  not  to  be  ac- 
cepted as  sufficient  to  justify  the  enactment  of  the 
regulation  in  question,  unless  it  can  be  shown  to 
come  within  the  true  intent  and  purpose  of  the 
power. 

The  Court  then  says:  "As  a  state  may,  for  the 
purpose  of  guarding  the  morals  of  its  own  people. 


Trusts  and  Monopolies.         167 

forbid  all  sales  of  lottery  tickets  within  its  limits, 
so  Congress,  for  the  purpose  of  guarding  the  peo- 
ple of  the  United  States  against  the  widespread 
pestilence  of  lotteries  and  to  protect  the  commerce 
which  concerns  all  the  states,  may  prohibit  the 
carrying  of  lottery  tickets  from  one  state  to  an- 
other." The  states  undoubtedly  have  the  power 
to  suppress  the  sale  of  lottery  tickets  within  their 
bounds,  but  no  one  ever  thought  of  classing  their 
right  to  do  so  as  an  incident  to  their  power  to  regu- 
late domestic  commerce.  Lottery  tickets  are  car- 
ried from  point  to  point  within  the  state  as  well  as 
from  state  to  state,  and  if  the  right  to  suppress 
the  traffic  in  them  cannot  properly  be  considered  as 
an  incident  to  the  power  of  the  state  to  regulate 
domestic  commerce,  it  is  difficult  to  understand 
how  it  can  more  properly  be  brought  within  the 
power  of  Congress  to  regulate  commerce  among 
the  several  states. 

The  power  of  the  states  to  regulate  or  suppress 
lotteries  and  to  prohibit  traffic  in  their  tickets,  is  a 
.part  of  their  police  powers.  The  Federal  govern- 
ment possesses  no  powers  except  those  which  have 
been  delegated  to  it  by  the  states,  and  as  no  police 
powers  have  ever  been  granted  to  it,  except  as  to 
the  territories  and  the  District  of  Columbia  and 
other  territory  over  which  it  has  been  given  ex- 
clusive jurisdiction,  it  follows  that  it  cannot  regu- 
late or  suppress  lotteries  by  virtue  of  the  same  right 
under  which  they  are  controlled  by  the  states. 

It  is  then  asked,  "If  a  state,  when  considering 
legislation  for  the  suppression  of  lotteries  within 
its  own  limits,  may  properly  take  into  view  the  evils 
that  inhere  in  the  raising  of  money  in  that  mode, 


l68  Combinations, 

why  may  not  Congress,  invested  with  the  power 
to  regulate  commerce  among  the  several  states, 
provide  that  such  commerce  shall  not  be  polluted 
by  the  carrying  of  lottery  tickets  from  one  state 
to  another?" 

Commerce  is  not  a  governmental  function;  it  is 
essentially  a  private  occupation,  which  is  enjoyed 
by  virtue  of  the  natural  right  of  every  individual 
to  exchange  his  products  for  those  of  other  men, 
and  exists  independently  of  governmental  pro- 
•vision  or  support.  Congress  has  not  been  given  the 
power  to  engage  in  commerce  among  the  states, 
nor  to  prohibit  such  commerce,  but  merely  to  regu- 
late it,  and  that  for  the  purpose  of  preserving 
and  encouraging  it  and  of  protecting  it  against  un- 
just and  discriminating  legislation  by  the  states 
and  undue  interference  by  private  individuals. 
Commerce  is  not  an  instrument  of  government 
which  may  be  used  or  restricted  at  the  pleasure  of 
the  administration,  but  it  is  a  private  right  which 
may  be  required  to  be  so  exercised  as  to  allow  the 
greatest  freedom  and  opportunity  to  all. 

The  regulation,  then,  is  clearly  intended  to  be 
for  the  benefit  of  commerce,  and  we  are  led  to  in- 
quire, does  the  carrying  of  lottery  tickets  from 
state  to  state  in  any  way  affect  interstate  com- 
merce? Does  the  carrying  of  lottery  tickets  have 
any  more  injurious  effect  upon  commerce  than  the 
transportation  of  newspapers,  dry  goods  or  other 
articles  ?  We  think  not,  and  must,  therefore,  con- 
clude that  there  is  no  interest  of  interstate  com- 
merce which  demands  that  the  carrying  of  lottery 
tickets  shall  be  forbidden. 

The  statute  prohibiting  the  shipment  of  diseased 


Trusts  and  Monopolies.  169 

cattle  in  interstate  commerce  is  then  cited  as  an 
instance  in  which  congressional  regulation  has 
taken  the  form  of  prohibition  of  particular  ar- 
ticles. The  placing  of  cattle  having  contagious 
or  communicable  diseases,  for  shipment  in  com- 
merce would  be  likely  to  infect  all  other  cattle 
with  which  they  come  in  contact,  and  thus  be  di- 
rectly injurious  to  the  rights  of  other  shippers.  A 
regulation,  therefore,  which  forbade  the  transpor- 
tation of  such  cattle,  would  be  directly  for  the  good 
of  commerce  and  so  within  the  power  of  Congress 
to  prescribe. 

The  Sherman  Anti-Trust  Act  is  then  referred  to 
as  an  instance  of  the  power  of  Congress  to  forbid 
the  doing  of  certain  things  in  relation  to  inter- 
state commerce.  The  Court,  however,  then  repeats 
the  words  of  Justice  Peckham  to  the  effect  that  a 
contract  to  be  prohibited  must  directly  and  not  as 
a  mere  incident  to  other  and  innocent  purposes, 
regulate  to  any  substantial  extent  interstate  com- 
merce. 

Do  lottery  tickets  or  the  carrying  of  them  in  any 
way  directly  relate  to  interstate  commerce?  If 
they  do,  they  will  come  within  the  principle  of  the 
last  two  cases,  but  if  not,  we  must  look  further. 

The  traffic  in  alcoholic  liquors  is  next  mentioned 
as  a  further  example  of  the  power  of  Congress 
to  exclude  articles  from  interstate  commerce.  The 
regulation  of  the  liquor  traffic  and  of  the  trans- 
portation of  lottery  tickets  appears  to  be  precisely 
the  same  in  principle,  the  states  have  power  to 
regulate  both,  and  they  alike  come  within  the  po- 
lice power  of  government  to  protect  the  health  and 


170  Combinations, 

morals  of  its  people.  If,  then,  the  Federal  Govern- 
ment has  power  to  control  one  it  has  the  other. 

The  Court  then  proceeded  to  show  that  Con- 
gress has  never  attempted  to  regulate  the  liquor 
traffic,  but  that  it  has,  on  the  contrar}^,  placed  the 
entire  matter  within  the  control  of  the  states  by- 
providing  that  all  liquors  imported  into  any  state 
shall  become  subject  to  its  jurisdiction  in  the  same 
manner  and  to  the  same  extent  as  though  they 
were  produced  therein.  It  is  said  that  if  all  the 
states  were  to  exercise  the  power  secured  to  them 
by  that  act,  and  prohibit  the  production  or  sale 
of  such  liquors  within  their  limits,  the  effect  would 
be  to  exclude  an  article  from  interstate  commerce 
as  completely  as  is  now  done  by  the  act  in  question. 

The  difference  between  the  two  cases  is  just  that 
which  exists  between  the  doing  of  a  thing  oneself 
and  the  having  it  done  for  one  without  his  consent. 
It  is  the  distinction  between  a  republic  and  a  mon- 
archy, between  a  government  by  the  people  and  a 
government  from  a  throne.  The  states  possessed 
the  undoubted  right  to  regulate  the  liquor  traffic 
within  their  limits,  and  Congress,  in  effect,  merely- 
provided  that  interstate  commerce  should  not  be 
used  as  a  means  of  defeating  that  power.  If,  then, 
all  of  the  states  were  to  enact  laws  forbidding  the 
production  or  sale  of  liquor,  the  prohibition  would 
be  of  their  own  making,  whereas,  if  a  number  of 
the  states  did  not  adopt  such  provisions,  and  Con- 
gress were  to  prohibit  the  carrying  of  liquors  in 
interstate  commerce,  it  would  be  an  infringement 
of  the  rights  of  the  citizens  of  these  states  to  ex- 
change their  products  with  one  another  and  with 
foreign  nations;   for  if  all  of  the  states  but  one 


Trusts  and  Monopolies.  171 

were  to  enact  prohibitory  laws,  that  one  would  still 
have  the  right  to  export  its  products  to  foreign 
countries,  and  to  import  such  liquors  if  it  desired 
to  do  so.  Congress  did  not  exclude  liquors  from 
interstate  commerce,  and  the  circumstances  seem  to 
suggest  no  greater  reason  for  its  doing  so  in  the 
case  of  lottery  tickets. 

The  Court  dwelt  upon  the  widespread  evils  of 
lotteries,  but  the  gravity  of  the  evil  affords  no  jus- 
tification for  the  usurpation  of  powers.  The  in- 
adequacy of  any  other  power  to  deal  with  the  evil 
is  also  suggested,  but  the  regulation  of  the  liquor 
traffic,  which  the  Court  so  fully  explained,  affords  a 
sufficient  answer  to  this  point.  Make  lottery 
tickets  subject  to  state  jurisdiction  as  soon  a3 
brought  within  its  limits,  and  you  place  the  whole 
matter  completely  under  state  control. 

Finally,  the  test  of  constitutionality  laid  down 
by  Chief  Justice  Marshall  is  cited :  "Let  the  end 
be  legitimate,  let  it  be  within  the  scope  of  the 
Constitution,  and  all  means  which  are  appropriate, 
which  are  plainly  adapted  to  that  end,  which  are 
not  prohibited,  but  consist  with  the  letter  and 
spirit  of  the  Constitution,  are  constitutional." 

"Let  the  end  be  legitimate,  let  it  be  within  the 
scope  of  the  Constitution."  By  legitimate  is  meant 
lawful,  or  within  the  recognized  power  of  the  gov- 
ernment to  act.  It  is  also  meant  that  the  end  shall 
be  legitimate  for  the  particular  government  in 
question,  for  many  things  might  be  perfectly  legiti- 
mate for  State  action  which  would  not  be  so  for 
the  National  Government,  and  vice  versa. 

What,  then,  is  the  end  sought  to  be  accomplished 
by  the  act  in  question  ?    It  is  entitled  "An  Act  for 


1172  Combinations, 

the  Suppression  of  Lotteries,"  etc. ;  the  language 
employed  in  it  clearly  indicates  the  intention  of 
its  framers  to  restrict  and  discourage  lotteries, 
and  the  Court,  speaking  of  its  provisions,  says: 
"If  the  carrying  of  lottery  tickets  from  one  state 
to  another  be  interstate  commerce,  and  if  Congress 
is  of  opinion  that  an  effective  regulation  for  the 
suppression  of  lotteries,  carried  on  through  such 
commerce,  is  to  make  it  a  criminal  offense  to  cause 
lottery  tickets  to  be  carried  from  one  state  to  an- 
other," etc.  The  purpose  of  this  legislation,  then, 
is  the  suppression  of  lotteries.  Is  that  end  within 
the  scope  of  the  Constitution  of  the  United  States? 
Does  it  come  fairly  within  the  purpose  of  ^ny  one 
of  the  enumerated  powers  conferred  upon  Con- 
gress by  that  instrument  ?  Or  does  the  still  broader 
purpose  to  which  the  suppression  of  lotteries 
may  be  said  to  contribute,  the  protection  of  the 
public  morals,  come  within  the  scope  of  tlie  Fed- 
eral Constitution?  We  think  not.  That  comes 
within  the  police  power,  and  Congress  has  never 
attempted  to  exercise  police  power  except  in  rela- 
tion to  territory  over  which  it  had  exclusive  and 
nnlimited  jurisdiction.  The  power  to  regulate  lot- 
teries or  to  protect  the  public  morals  has  nowhere 
been  expressly  granted  to  Congress,  and  whatever 
may  be  said  of  the  right  to  use  its  power  to  regu- 
late interstate  commerce  as  a  means  to  that  end, 
it  seems  like  a  stretch  of  the  imagination  to  believe 
that  the  power  to  protect  the  public  morals  was 
intended  to  be  included  in  the  grant  of  power  to 
I'cgulate  commerce  among  the  states.  The  end, 
then,  not  being  within  the  scope  of  the  Constitu- 
tion, according  to  the  rule  of  Chief  Justice  Mar- 


Trusts  and  Monopolies.  173 

shall,  the  legislation  which  seeks  to  secure  it  must 
be  unconstitutional,  and  the  mere  possession  of 
powers  which  might  be  used  for  that  purpose  is  of 
no  avail. 

We  have  now  reviewed  the  several  grounds  sug- 
gested by  the  Court  upon  which  the  right  of  Con- 
gress to  exclude  certain  articles  from  commerce 
among  the  irtates  might  be  founded,  but  we  fail  to 
discover  any  convincing  reason  for  basing  it  upon 
any  one  of  them.  We  think  it  safe  to  predict, 
then,  that  in  view  of  the  exhaustive  review  of  the 
subject  made  in  this  case,  and  the  great  uncertainty 
in  which  the  right  of  Congress  to  act  appears  to 
be  enshrouded,  even  in  a  case  in  which  morality 
and  popular  opinion  seem  to  unite  in  demanding 
such  action,  this  d2cision  will  not  establish  a  prece- 
dent which  will  be  likely  to  lead  to  any  extension 
of  this  power  of  Congress  so  as  to  affect  other  ar- 
ticles of  commerce  in  which  no  moral  questions  are 
involved. 

One  of  the  principal  points  made  clear  by  all 
these  decisions  is  that  interstate  commerce  is  the 
subject  which  Congress  has  power  to  regulate,  and 
that  it  cannot  be  used  as  a  pretext  for  interfering, 
jwith  any  other   subjects,  no  matter  how  closely, 
ffllthey  may  be  allied  to  it.     Speaking  on  the  sapie 
I  subject,  Mr.  Tucker,  in  his  work  on  the  Constitu- 
If  tion,  after  reviewing  the  decision  of  Chief  Justice 
^  I  Marshall  in  the  case  of   Gibbons  versus   Ogden, 
says:     "It  may  be  remarked  that  the  power  of 
Congress  is  not  to  regulate  persons  and  things,  but 
merely  commerce  in  them." 

It  has  recently  been  suggested  by  some  persons 
high  in  authority,  whose  opinions  on  such  subjects 


174  Combinations, 

are  deserving  of  the  most  careful  consideration, 
that  the  power  of  Congress  to  regulate  combina- 
tions and  monopolies  has  not  yet  been  exhausted. 
They  assert  that  the  power  to  regulate  it  in- 
volves the  power  to  prescribe  regulations  as 
to  who  may  engage  in  interstate  commerce, 
and  upon  what  conditions  they  may  do  eo; 
that  combinations  may  therefore  be  required  to 
procure  a  license  from  the  United  States  Govern- 
ment before  their  products  can  be  transported  from 
etate  to  state,  and  that  suitable  restrictions  may 
be  imposed  upon  them  before  such  license  shall  be 
issued. 

But  what  use  do  combinations  make  of  inter- 
state commerce,  witli  which  Congress  would  have 
the  power  to  interfere?  They  cannot  travel  to 
and  fro  as  individuals  do;  there  is  no  thought  of 
interfering  with  the  right  of  individuals  to  go  and 
come  at  pleasure,  whether  they  be  the  officers  or 
agents  of  combinations  or  monopolies,  or  merely 
engaged  in  private  business.  It  must  therefore  be 
the  transportation  of  their  products,  and  tliat 
alone,  which  is  to  be  relied  upon  to  bring  these 
combinations  within  the  supposed  right  of  control 
by  Congress. 

But  the  Supreme  Court  of  the  United  States  has 
already  declared  that  the  mere  transportation  of 
goods  produced  by  a  combination  from  one  state 
to  another,  or  the  enhancement  of  the  price  of  any 
commodities  which  are  intended  to  be  so  trans- 
ported, or  the  suppression  of  the  manufacture  or 
production  of  articles  the  transportation  of  which 
has  heretofore  constituted  an  important  item  of  in- 
terstate commerce,  does  not  constitute  such  an  in- 


Trusts  and  Monopolies.  175 

terference  with  commerce  among  the  states  as  to 
warrant  Congress  in  assuming  control  of  the  man- 
ufacture or  production  of  these  articles.  In  the 
case  of  the  United  States  versus  the  E.  C.  Knight 
Company  it  was  admitted  that  some  part  of  the 
products  of  the  Sugar  Trust,  with  which  the  de- 
fendant company  was  combining,  would  undoubt- 
edly become  a  part  of  interstate  commerce,  and 
that  the  price  of  such  products  would  in  all  prob- 
ability be  raised  by  the  trust,  which  w^ould  tend  to 
diminish  the  volume  of  interstate  commerce;  but 
this  was  held  to  be  an  indirect  result  of  the  trust 
agreement,  the  real  object  of  which  was  to  control 
the  refining  of  sugar,  and  Congress  was  held  to 
have  no  power  to  interfere  in  the  matter. 

In  making  the  point  so  clear  that  the  power  of 
Congress  (under  this  clause  of  the  Constitution) 
to  assume  Jurisdiction  over  any  class  of  cases  de- 
pends upon  their  interference  with,  restriction  of, 
or  obstruction  to,  interstate  commerce,  and  not 
upon  their  use  of,  or  relation  to  it,  the  Court  would 
seem  to  have  anticipated  any  attempt  that  might 
be  made  to  legislate  further  upon  the  subject,  and 
to  have  declared  it  to  be  of  no  avail. 

We  have  already  shown  Chief  Justice  Fuller's 
statement  of  some  of  the  evils  which  would  be  likely 
to  result  from  any  attempt  on  the  part  of  th« 
national  government  to  regulate  the  manufacture 
or  production  of  those  articles  which  are  intended 
for  interstate  commerce,  and  an  attempt  to  say 
who  may  or  may  not  engage  in  interstate  com- 
merce would  be  equally  far  reaching  in  its  effects. 
As  was  said  in  Colonial  days,  the  right  to  take  a 
penny  implies  the  right  to  take  a  pound;  so  the 


176  -  Combinations, 

right  to  assume  jurisdiction  over  combinations  be- 
cause of  their  participation  in  interstate  commerce 
would  imply  the  right  to  assume  jurisdiction  over 
individuals  who  have  anything  to  do  with  inter- 
state commerce;  and  since  commerce  includes  the 
carrying  of  passengers  as  well  as  that  of  merchan- 
dise, and  includes  the  passengers  carried  as  well  as 
the  carrying  of  them,  it  is  clear  that  there  would 
soon  be  but  very  little  left  for  the  states  to  retain 
jurisdiction  over. 

The  power  to  regulate  commerce  among  the  sev- 
eral states  was  given  to  Congress  by  the  Constitu- 
tion for  the  purpose  of  preserving  the  freedom  of 
that  commerce,  and  not  to  be  used  as  a  means  of 
extending  the  powers  of  Congress  so  as  to  include 
the  regulation  of  every  other  industry  with  which 
commerce  may  come  in  contact.  If  the  power  to 
regulate  commerce  among  the  several  states  can 
be  extended  in  this  manner,  there  would  seem  to 
be  no  good  reason  why  the  power  to  establish  post 
offices  and  post  roads  could  not  be  extended  so  as 
to  include  the  regulation  of  the  business  of  all 
those  who  make  use  of  the  mails;  and  instead  of 
being  a  government  of  clearly  defined  enumerated 
powers,  we  would  then  have  a  government  exercis- 
ing very  general  and  far  reaching  powers,  and  the 
boasted  sovereignty  of  the  individual  states  in 
local  affairs  would  soon  cease  to  be  more  than  an 
idle  dream. 


Trusts  and  Monopolies.  177 


CHAPTER   VIII. 

QUASI-PUBLIC  MONOPOLIES. 

It  is  customary  for  writers  upon  the  law  of  cor- 
poration to  divide  civil  corporation,  or  those  which 
are  engaged  in  business  or  in  the  conduct  of  public 
affairs  into  two  general  classes,  namely,  public  cor- 
porations and  private  corporations.  ; 

In  public  corporations  are  included  all  govern- 
mental bodies,  municipalities,  etc.,  while  private 
corporations  comprise  all  those  which  are  organ-j 
ized  for  individual  purposes. 

A  distinction  is  also  made  between  those  corpo-l 
rations  which  are  devoted  to  strictly  private  busi-j 
ness  and  those  which,  though  organized  by  private 
persons,  are  engaged  in  the  discharge  of  some  duty; 
or  service  which  is  necessary  to  the  comfort,  safetyi 
or  convenience  of  the  public,  and  over  which,! 
therefore,  it  is  said  to  possess  certain  rights  of  con- 
trol. This  distinction  has  also  been  strongly  em-j 
phasized  by  the  decisions  of  the  courts,  and  the 
latter  class  has  been  termed  quasi-public  corpora-j 
tions. 

We  then  have  three  classes  of  corporations — pub-] 
lie,  private,  and  quasi-public  corporations. 

Recent  writers  upon  the  subject  of  monopolies 
have,  among  other  classifications,  also  divided  their 


178  Combinations, 

subject  into  the  two  general  classes,  public  monop- 
olies and  private  monopolies.  This  classification 
of  monopolies  corresponds  exactly  with  the  classi- 
fication of  corporations,  public  monopolies  includ- 
ing all  organized  portions  of  the  government,  and 
private  monopolies  c-omprising  all  those  organized 
or  secured  for  private  purposes.  As  the  courts,  in 
their  efforts  to  apply  the  law  to  private  corpora- 
tions, have  found  it  necessary  to  subdivide  them 
into  two  classes,  according  to  the  public  or  private 
nature  of  their  employment,  it  would  seem  that 
private  monopolies,  which  have  to  do  more  directly 
with  the  subject  matter  of  the  employment  than* 
with  the  form  of  organization,  should  be  subdi- 
vided in  the  same  manner.  Or,  in  other  words,  if 
certain  employments  contain  peculiarities  which 
require  that  corporations  engaged  in  them  shall  be 
distinguished  from  other  private  corporations  and 
subjected  to  special  treatment  and  regulation,  it 
would  seem  that  they  must  contain  elements  which 
require  special  consideration  and  which  therefore 
constitute  them  a  class  distinct  from  other  branches 
of  business  or  kinds  of  employment.  This  third 
class  of  monopolies  we  shall  term  quasi-public 
monopolies. 

We  then  have  three  classes  of  monopolies — pub- 
lic, private  and  quasi-public  monopolies — corre- 
sponding precisely  to  the  three  classes  of  civil  cor- 
porations. 

Inasmuch,  then,  as  the  great  majority  of  combi- 
nations, trusts  and  monopolies  of  all  kinds  are  rap- 
idly assuming  the  corporate  form  of  organization, 
and  those  which  are  not  are  engaged  in  the  same 
general  line  of  pursuits,  and  subject  to  the  same 


Trusts  and  Monopolies.  179 

conditions,  we  wish  the  reader  to  bear  constantly  in 
mind  the  close  relationship  which  exists  between 
this  classification  of  monopolies  and  that  of  cor- 
porations. It  will  help  him  to  recognize  the  neces- 
sity and  wisdom  of  adopting  for  the  regulation  of 
combinations  and  trusts,  principles  which  are  gen- 
eral in  their  nature  and  alike  applicable  to  all 
cases  falling  within  that  class,  and  will  afford  him 
the  experience  and  wisdom  of  the  law  as  a  warrant 
for  making  a  distinction  between  the  two  classes 
of  monopolies  and  for  adopting  radically  different 
methods  of  treatment  for  each. 

Numerous  sub-classifications  of  monopolies  have 
also  been  made,  based  upon  the  form  and  nature  of 
their  organization  and  the  character  of  the  busi- 
ness in  which  they  are  engaged,  but  it  is  not  our 
purpose  to  enter  into  an  analysis  of  the  details 
pertaining  to  the  operation  of  each  specific  branch 
of  industry.  We  merely  wish  at  this  time  to  en- 
deavor to  determine  upon  a  few  general  principles 
the  application  of  which  would  promote  the  devel- 
opment of  the  whole  industrial  system,  and  for  this 
purpose  the  three  general  classes,  public,  private 
and  quasi-public  monopolies,  will  suffice. 
,  With  public  monopolies  which  relate  merely  to 
the  subdivisions  of  the  government  we  have  noth- 
ing to  do  in  this  work,  and  as  we  have  thus  far  de- 
voted ourself  exclusively  to  the  consideration  of 
private  monopolies,  we  shall  now  turn  our  atten-  */ 
tion  to  the  consideration  of-'^uasi-public  monopo- 
lies, and  of  the  treatment  of  combinations  and 
trusts  which  have  for  their  purpose  the  control  of 
what  are  termed  public  utilities,  such  as  railways^ 
telegraphs,  telephones,  canals,  street  railways,  etc.>/ 


i8o  Combinations, 

all  of  which  fall  within  this  classification  of  our 
subject. 

By  a  quasi-public  monopoly  we  mean  the  sub- 
stantially exclusive  right  to  discharge  some  duty 
or  service  to  the  public  which  is  possessed  by  pri- 
vate persons,  either  as  individuals  or  corporations, 
but  over  which  the  public  retains  certain  powers  of 
control,  such  as  the  right  to  regulate  the  service,  to 
fix  the  charges,  etcr^n  considering  this  branch  ef 
the  subject,  therefore,  we  should  always  keep  in 
mind  the  rights  of  both  parties,  the  public  on  the 
one  hand,  and  the  private  individuals  or  corpora- 
tions whose  time  and  capital  are  invested  on  the 
other.     Since  the  rights  of  the  parties  appear  to, 
•interweave   more   intricately    in    relation    to    thisl 
class  of  employment  than  in  any  other  known  toj 
the  law,  it  is  clear  that  we  should  first  thoroughly  \ 
understand  the  nature  and  origin  of  the  rights  j 
which  we  are  now  about  to  examine,  if  we  hope  to 
avoid  confusion  in  our  attempt  to  adjust  their  re-^' 
lations  to  each  other. 

The  rights  of  the  public  atise  from  the  very  or- 
ganization of  civil  society.  They  grow  out  of  the 
obligation  which  society  has  assumed  to  protect 
each  and  all  of  its  members  in  the  possession  of 
property,  and  "in  the  enjoyment  of  life,  liberty  and 
the  pursuit  of  happiness."  These  rights  and  obli- 
gations may  be  few  and  simple  in  primitive  so- 
ciety, but  they  multiply  and  become  more  complex, 
comprehensive  and  far  reaching  as  society  becomes 
more  highly  developed  and  the  social  requirements 
become  numerous  and  exacting. 

Public  highways  were  early  recognized  as  one  of 
the  first  requisites  for  the  promotion  of  intercourse 


Trusts  and  Monopolies.  i8i' 

among  the  inhabitants  of  civilized  communities, 
and  in  order  to  protect  the  whole  people  in  the  full 
enjoyment  of  them,  free  from  molestation  or  in- 
terference of  any  kind,  they  were  placed  in  charge 
of  the  government. 

The  right  of  organized  government  thus  to  con- 
trol the  streets  in  towns  and  the  highways  through- 
out the  country  is  generally  admitted.  It  is  the 
almost  universal  practice  among  civilized  nations, 
and  there  would  seem  to  be  no  difference  in  princi- 
ple, whether  the  highway  extends  merely  from 
town  to  town,  from  state  to  state,  or  from  ocean 
to  ocean,  or  whether  it  be  made  of  clay,  wood, 
stone,  or  of  steel.  The  right  of  government  to 
control  highways  intended  for  the  general  use  of 
pedestrians,  equestrians,  bicycles,  and  vehicles  pro- 
pelled by  horse,  gas,  compressed  air,  electricity, 
steam,  or  other  forms  of  power,  is  everywhere  con- 
ceded, and  that  though  they  may  extend  from  one 
end  of  the  continent  to  the  other.  The  right  to 
control  navigable  lakes  and  rivers,  which  are  Na- 
ture's highways,  has  never  been  disputed.  What 
distinction,  then,  should  be  made  because  of  the 
fact  that  the  roads  be  constructed  of  asphaltum,  of 
granite  blocks,  or  of  steel  rails?  The  purposes 
and  ends  of  the  road  are  identical,  the  people  are 
entitled  to  the  same  protection  in  making  use  of  it, 
and  the  government  is  under  the  same  obligation 
to  afford  that  protection  to  them. 

Every  right  that  a  government  possesses  arises 
out  of  some  duty  which  it  owes  to  its  people.  Thus 
[the  government  denies  to  its  subjects  the  right  to 
carry  arms,  which  deprives  them  of  the  means  of 
being  at  all  times  ready  to  repel  assault  or  to  en- 


i82  Combinations, 

force  redress  of  other  wrongs,  and  it  therefore  as- 
sumes the  obligation  to  protect  them  against  mo- 
lestation or  injury.  It  is  equally  bound  to  afford 
this  protection,  whether  the  people  be  walking  on. 
the  sidewalk  or  riding  on  a  railway  train,  and  is 
therefore  endowed  with  all  rights  necessary  for 
that  purpose.  Government  denies  to  individuals 
the  right  to  cross  grounds  or  otherwise  trespass  on 
private  property,  and  it  is  therefore  bound  to  af- 
ford them  a  safe  and  suitable  highway  upon  which 
they  may  be  protected  in  passing  through  the 
country,  and  it  possesses  all  rights  and  powers  es- 
sential to  that  end. 

In  speaking  herein  of  governmental  control,  we 
have  not  meant  to  refer  to  any  particular  branch 
or  division  of  the  government,  for  the  public 
rights  and  obligations  of  which  we  have  spoken 
pertain  equally  to  all,  so  far  as  the  subject  matter 
lies  within  their  particular  jurisdiction,  and  it  will 
serve  equally  well  to  illustrate  our  point,  whether 
we  have  in  mind  a  general  Government,  as  a  State 
or  Nation,  or  one  or  all  of  its  subdivisions,  as  in 
the  case  of  highways  which  become  successively 
subject  to  the  jurisdiction  of  township  after  town- 
ship, extending  over  perhaps  the  entire  width  of 
the  country. 

Among  other  subjects  of  public  concern  which 
have  imposed  additional  duties  upon  government, 
and  have  therefore  conferred  certain  rights  of  con- 
trol, are  bridges,  which  always  have  to  be  con- 
structed under  governmental  authority,  and  have 
usually  been  retained  under  its  exclusive  control. 
Water-works  have  been  required  to  supply  the  peo- 
ple of  the  towns  with  water,  and  in  order  to  oper- 


Trusts  and  Monopolies.  183 

ate  these  pipes  were  required  to  be  laid  through 
the  public  streets,  which,  as  we  have  seen,  have 
been  vested  in  the  town  government.  The  towns 
have  therefore  been  obliged  either  to  construct  the 
water-works  themselves  or  to  grant  to  private  per- 
sons or  corporations  the  right  to  make  use  of  the 
streets  for  that  purpose;  but  the  granting  of  these 
rights  would  be  the  giving  to  private  persons  the 
use  of  public  property  for  the  purpose  of  affording 
certain  services  to  the  people,  and  the  government 
cannot  thus  escape  its  duty  to  see  to  it  that  proper 
services  are  rendered,  and  to  regulate  them  both  as 
to  quality  and  price. 

Gas  and  electric  light  plants,  street  car  service, 
telephones,  telegraphs,  the  postal  system,  elevators, 
warehouses  and  other  public  utilities  all  fall  with- 
in this  same  class  and  impose  similar  rights  and 
obligations  upon  the  government.  The  education 
of  children,  the  care  of  the  sick,  and  the  protection 
of  the  poor,  the  feeble  and  the  helpless  are  also 
subjects  of  public  concern,  and  impose  duties  upon 
the  government  which  have  generally  been  recog- 
nized and  complied  with,  more  or  less  satisfactorily, 
by  the  establishment  of  schools,  the  erection  of  hos- 
pitals, and  the  maintenance  of  asylums  and  homes 
of  various  kinds. 
^^  Thus  we  see  that  when  society  requires  indi- 
viduals to  submit  to  the  will  of  the  majority  in  all 
matters  in  which  their  actions  or  property  inter- 
ests become  intimately  involved  with,  or  appear  to 
conflict  with,  the  rights  of  their  fellow  citizens,  it 
assumes  the  duty  of  regulating  these  matters  and 
of  protecting  the  people  in  the  free  and  full  enjoy- 
ment of  all  those  rights  and  privileges  which  the 


184  Combinations, 

laws  of  civilized  society  have  guaranteed  to  its 
members,  and  in  order  to  discharge  these  duties  it, 
in  the  form  of  organized  government,  assumes 
control  of  all  property  of  every  kind  which  is  re- 
quired to  be  used  in  common  or  for  the  public 
good,  and  acquires  the  right  to  do  all  things  neces- 
sary to  the  complete  discharge  of  the  obligations 
which  it  has  assumed. 

It  is  not  intended,  in  this  review  of  the  growth 
of  governmental  powers,  to  depict  the  successive 
steps  by  which  any  community  or  government  has 
actually  attained  to  the  full  possession  ef  those 
powers  which  enable  it  to  command  the  obedience 
and  respect  of  its  citizens,  and  for  certain  pur- 
poses to  exercise  absolute  control  over  the  lives  and 
property  of  its  people ;  but  it  does  in  effect  present 
the  course  of  development  through  which  all  gov- 
ernments have  passed.  Instead  of  progressing  by 
clearly  defined  steps  from  the  acquisition  of  one 
power  to  that  of  another,  it  is  true  that  this  devel- 
jopment  has  been  an  almost  imperceptible  move- 
ment onward  along  many  lines  at  the  same  time; 
there  has  been  no  deliberate  assumption  of  new 
and  distinct  powers  marking  successive  epochs  in 
the  development  of  the  functions  and  scope  of  the 
government  of  to-day,  but  rather  a  gradual  un- 
dertaking of  a  little  here  and  a  little  there,  without 
any  consideration  of  the  extent  to  which  these 
small  beginnings  would  ultimately  lead,  or  the  im- 
portant part  which  these  small  duties  so  naturally 
assumed  were  to  play  in  controlling  the  affairs  of 
civilized  society.  By  thus  tracing  the  development 
of  a  few  individual  functions  of  government  from 
their  origin  to  their  present  advanced  stage  of  per- 


Trusts  and  Monopolies.  185 

'  tFection,  it  is  believed  that  the  true  nature  of  the 
rights  and  obligations  which  they  entail  will  be 
jnore  clearly  understood. 

Let  us  now  for  a  few  moments  turn  our  atten- 
tion to  the  rights  and  privileges  of  the  individual 
members  of  society.  Among  the  earliest  public 
lemployments  to  which  private  individuals  devoted 
their  services  were  stage  lines,  which  were  estab- 
lished for  the  purpose  of  carrying  the  mails  and 
of  conveying  passengers  and  freight  to  and  fro. 
.These  lines  were  owned  and  operated  by  private  in- 
dividuals, who  invested  large  sums  of  money  in 
them,  and  they  frequently  proved  to  be  very  profit- 
able investments.  In  the  course  of  time,  however, 
as  the  country  became  more  generally  populated, 
and  with  the  advent  of  the  steam  locomotive,  rail- 
roads began  to  supersede  the  stage  lines  and  to 
drive  them  out  of  business.  Their  proprietors 
complained  grievously  of  the  injustice  that 
was  being  done  them  by  the  establishment  of 
the  railroads,  the  loss  of  the  occupations  they  had 
followed  for  so  many  years,  and  the  practical  de- 
struction of  their  property  by  rendering  it  useless 
for  the  purpose  for  which  it  was  intended.  They 
took  no  account  of  the  fact  that  their  properties 
may  have  repaid  them  several  times  the  amount 
which  they  had  originally  invested  in  them,  or 
that  the  business  had  afforded  them  a  remunera- 
tive occupation  during  such  time  as  they  had  fol- 
lowed it.  They  merely  knew  that  they  were  in 
possession  of  a  highly  profitable  business  which 
was  about  to  be  wrested  from  them,  and  past  profits 
count  for  but  little  when  we  are  contemplating 
present  or  future  losses ;  but  the  new  and  superior 


i86  Combinations, 

accommodation  afforded  by  the  railroads  prevailed, 
just  as  the  more  useful  and  progressive  institutions 
of  advancing  civilizations  always  will,  even  though 
the  interests  of  those  who  have  built  up  and  sup- 
ported the  institutions  of  the  past  and  present 
must  be  sacrificed  in  their  wake. 

As  the  work  of  opening  highways  throughout  the 
country  progressed  large  rivers  were  encountered 
to  be  crossed,  and  in  the  absence  of  bridges  this 
could  only  be  done  by  the  use  of  boats.  Boatmen 
early  began  to  devote  their  time  to  the  operation 
of  ferries  for  the  transportation  of  freight  and  pas- 
sengers across  these  rivers.  Many  of  these  ferries 
have  continued  in  operation  throughout,  several 
generations,  and  although  subjected  to  certain  gov- 
ernmental regulations,  as  to  charges,  to  provide  for 
the  safety  of  passengers,  etc.,  they  have  always  been 
owned,  operated  and  recognized  as  private  prop- 
erty. But  as  a  demand  for  open  and  unobstructed 
highways  became  more  pressing,  the  cities,  towns 
or  counties  in  which  these  ferries  were  located  in 
many  instances  constructed  bridges  across  these 
streams,  thus  driving  the  ferries  out  of  business, 
just  as  the  railroads  had  done  with  the  stage  coach. 
The  capital  invested  in  these  ferries  was  likewise 
sacrificed,  and  it  is  to  be  supposed  that  their  pro- 
prietors did  all  in  their  power  to  oppose  the  con- 
struction of  bridges,  but  the  public  recognized  it 
to  be  the  duty  of  the  government  to  provide  high- 
ways suitable  and  adequate  to  the  needs  of  the 
community,  and  its  right  to  adopt  any  or  all  means 
suitable  or  essential  to  that  end,  even  though  the 
interests  of  individuals  might  suffer  in  the  transi- 
tion from  the  old  forms  to  the  new. 


Trusts  and  Monopolies.  187 

The  public  was  aware  of  the  fact  that  the  ferry- 
men had  been  discharging  a  service  for  which  they 
had  received  compensation,  and  which  it  had  a 
perfect  right  at  any  time  to  undertake  to  discharge 
for  itself,  in  the  same,  or  in  any  other  way.  In 
most  cases  ferrymen  have  been  required  to  procure 
a  license  before  being  allowed  to  pursue  their  busi- 
ness. They  have  been  subjected  to  official  inspec- 
tion, they  are  obliged  to  serve  the  whole  public 
without  discrimination,  and  they  collect  their  fees 
from  the  people  at  rates  which  have  been  prescribed 
by  law.  In  short,  they  have  virtually  been  in  the 
service  and  pay  of  the  public,  and  to  dispense  with 
-their  services  by  the  construction  of  a  bridge  or 
otherwise  is  no  more  unjust  than  it  is  to  discharge 
a  clerk  who  has  for  many  years  been  employed  in 
the  county  clerk's  office  but  whose  services  are  no 
longer  required.  The  ferryman  would  have  no 
more  right  to  set  up  the  claim  of  vested  interest 
in  the  continuation  of  the  ferry  than  the  man  who 
might  be  appointed  to  swing  the  bridge  would  have 
to  claim  property  rights  in  that  occupation. 

The  fact  that  a  ferryman  brings  his  property 
into  the  service  of  the  public,  together  with  his 
personal  services,  does  not  alter  the  principle  in  the 
least.  It  is  just  the  same  as  when  a  man  engages 
to  work  with  his  team  of  horses  for  the  city — he 
will  simply  receive  a  larger  salary  than  one  who 
merely  drives  a  team  which  belongs  to  the  city  or 
does  other  work  of  the  same  kind.  So  the  ferry- 
man is  presumed  to  receive  a  greater  amount  of 
compensation  in  consideration  of  the  amount  of 
capital  which  he  had  invested  in  the  property 
which  he  employs  in  the  service. 


1 88  Combinations, 

The  crowded  condition  of  the  population,  and 
the  erection  of  buildings  covering  practically  every 
available  foot  of  ground  in  the  congested  portions 
of  large  cities,  renders  it  impracticable  to  obtain  a 
supply  of  water  from  private  wells  as  in  the  less 
thickly  populated  districts  of  the  country.  This 
makes  it  a  necessity,  as  well  as  a  convenience,  to 
draw  the  water  supply  from  a  distant  point  for  dis- 
tribution. In  order  to  do  this,  it  becomes  neces- 
sary to  conduct  the  water  through  the  city  by 
means  of  pipes  laid  in  the  streets,  and  since  it  is 
also  required  to  make  provision  for  the  laying  of 
sewer  and  gas  pipes,  electric  light  and  power  wires, 
telegraph  and  telephone  wires,  cables,  street  car 
tracks,  trolley  wires,  anl  perhaps  pneumatic  tubes 
and  other  services,  all  in  the  same  street,  it  follows 
that  whoever  first  secures  the  privilege  of  laying 
water  pipes  through  the  streets  would  have  a  prac- 
tical, if  not  an  absolute,  monopoly  of  that  service. 

As  we  have  before  remarked,  the  streets  belong 
to  the  public,  or  its  representative,  the  govern- 
ment. ]N'o  one,  therefore,  can  undertake  to  furnish 
water  or  other  public  service  of  that  character  to 
the  people  of  a  city  without  first  obtaining  author- 
ity from  the  city  government  to  exercise  rights 
and  powers  which  have  been  intrusted  to  it  for  the 
protection  and  interests  of  the  people. 

A  public  water  service  is  an  absolute  necessity 
of  city  life,  and  the  city  government  controls  the 
only  avenues  through  which  this  service  can  be 
supplied.  If,  then,  no  private  parties  were  to  come 
forward  and  offer  to  supply  this  want  it  would 
seem  imquestionably  to  be  the  imperative  duty  of 
the  city  government  to  supply  it;   but  if,  on  the 


Trusts  and  Monopolies.  i8g| 

other  hand,  private  parties  did  offer  to  provide  this 
service,  it  would  indicate  that  large  profits  are  ex- 
pected to  be  derived  from  the  business,  and  would 
appear  to  afford  an  additional  reason  why  the  serv- 
ice should  be  rendered  by  the  government  itself. 
If,  however,  the  government  grants  to  private  in- 
dividuals or  corporations  the  privilege  of  supplying 
water  to  the  people  of  the  city,  it  still  retains  its 
full  share  of  responsibility  to  the  people,  not  only 
to  see  that  water  is  supplied,  but  to  protect  them 
from  imposition  and  injustice  of  every  kind  as  to 
price,  quality,  quantity  and  manner  of  service.  If, 
then,  the  relationship  of  the  water  company  to  the 
city  government  be  analyzed  it  will  be  found  that 
it  occupies  precisely  the  same  position  as  did  the 
ferryman  whose  relations  to  the  municipality  hav- 
ing immediate  jurisdiction  over  him  we  have  just 
described  at  some  length.  That  is  to  say,  the  gov- 
ernment owes  it  as  a  duty  to  the  people  to  provide 
an  efficient  supply  of  water,  but  instead  of  doing 
so  directly  itself  it  permitted  a  private  company  to 
do  so  for  it.  Thus  the  water  company  became  the 
agent  of  the  government,  and  might  be  dealt  with 
just  as  any  other  employee. 

It  may  be  that  the  employment  might  be  fixed 
by  the  franchise  for  a  definite  number  of  years, 
but  that  does  not  affect  the  relationship.  The 
relation  of  the  parties  is  that  of  employer  and  em- 
ployee, and  so  long  as  a  private  company  continues 
to  devote  time  and  capital  to  a  public  service,  it 
should  be  regarded  as  a  servant  of  the  government, 
and  be  presumed  to  have  undertaken  the  risks  and 
liabilities  of  the  employment.  A  laboring  man 
who  works  for  small  wages  is  held  by  the  common 


190  Combinations, 

law  to  have  assumed  all  the  ordinary  hazards  of 
the  business  in  which  he  is  employed ;  and  though 
he  may  become  permanently  disabled,  or  even  lose 
his  life  through  the  carelessness  or  negligence  of 
a  fellow  servant,  he  and  his  family  are  wholly 
without  redress  and  must  bear  their  loss  as  best 
they  can.  Or,  if  an  individual  who  has  received 
no  special  privileges  from  the  government  in- 
vests a  hundred  thousand  dollars  in  a  plant  for 
the  manufacture  of  bicycles,  and  the  following 
year  the  bicycle  is  superseded  by  the  automobile, 
or  the  demand  for  bicycles  otherwise  decreases 
to  such  an  extent  as  to  render  the  business  an 
entire  failure,  there  is  nothing  left  for  him  but 
to  bear  his  loss  in  silence,  and  to  make  the  best  of 
a  bad  bargain.  Why,  then,  should  any  greater 
consideration  be  shown  for  a  corporation  which  has 
devoted  its  time  and  property  to  a  public  service 
upon  conditions  which  it  had  carefully  considered 
in  advance,  and  from  which  it  has  almost  invari- 
ably reaped  a  rich  harvest? 

The  development  of  modern  civilization  has 
made  gas  and  electric  lights,  street  car  service,  the 
telephone  and  the  telegraph  quite  as  much  a  ne- 
cessity of  city  life  as  is  the  supply  of  water.  Since 
these  can  only  be  supplied  through  the  use  of  the 
same  public  streets  through  which,  as  we  have  just 
seen,  the  water  must  be  conducted,  and  as  this  use 
of  the  streets  involves  the  exercise  of  precisely  the 
same  powers  and  privileges  which  we  have  just  de- 
scribed in  connection  with  the  granting  of  fran- 
chises to  water  companies,  it  follows  that  the  same 
conditions,  rights  and  obligations  which  pertain  to 
the  operation  of  the  public  water  service  are  equally 


Trusts  and  Monopolies.  191* 

applicable  to  each  of  these  several  branches  of 
the  public  service,  whether  they  be  supplied  di- 
rectly by  the  government  or  by  private  individuals 
or  corporations;  but  as  we  have  already  described 
them  with  some  degree  of  detail,  it  is  unnecessary 
to  repeat  our  observations  here. 

One  of  the  most  fundamental  principles  of  or- 
ganized society  is  to  secure  to  every  individual  the 
right  to  engage  in  whatever  business  or  employ- 
ment  he  may  select,  and  to  pursue  his  happiness 
according  to  his  own  wishes,  providing  that  he 
does  not  interfere  with  the  right  of  any  other  citi- 
zen to  do  the  same.  This  means  that  in  the  exer- 
cise of  those  rights  in  which  he  conflicts  with  the 
rights  or  interests  of  no  other  man,  the  individual 
is  supreme,  and  the  only  relation  which  govern- 
ment bears  to  him  is  to  protect  him  in  the  free  and 
full  enjoyment  of  them;  but  whenever  the  rights 
of  two  or  more  private  persons  conflict  they  are 
obliged  to  yield  to  the  rules  which  the  government 
has  prescribed  for  the  regulation  of  such  cases. 
Thus  if  a  person  in  the  exercise  of  his  right  to 
travel  the  public  highways  free  from  all  unneces- 
sary interference  or  molestation  chooses  to  keep  to 
the  left-hand  side  of  the  road,  and  another  exercis- 
ing the  same  right,  but  traveling  in  the  opposite 
direction,  resolves  to  keep  to  the  right-hand  side^  it 
is  evident  that  a  collision  will  most  likely  occun. 
These  individuals,  then,  are  in  these  cases  required 
to  subordinate  their  own  wishes  to  the  expressed 
will  of  the  public  and  to  obey  the  law  of  the  roads^ 
by  keeping  to  the  right. 

It  follows  from  the  provision  that  no  individual 
shall  interfere  with  the  rights  of  any  other  that  no 


192  Combinations, 

person  shall  claim  or  acquire  any  exclusive  rights 
in  property,  powers,  privileges,  duties  or  occupa- 
tions in  which  a  number  of  individuals  or  the 
whole  public  are  equally  interested.  In  those 
cases,  then,  in  which  the  interests  of  the  public  are 
directly  affected  by  the  discharge  of  the  duty,  serv- 
ice, employment  or  business,  the  rights  of  the 
public  are  paramount,  and  those  of  the  individual 
become  a  matter  of  mere  secondary  importance. 
Thus  a  public  highway  is  a  public  necessity,  and 
its  preservation  is  a  matter  which  directly  affects 
the  interests  of  the  entire  community.  Every  citi- 
zen is  entitled  to  make  free  use  of  it  in  common 
with  all  other  members  of  the  community  for  cer- 
tain purposes  and  in  the  manner  prescribed  by 
law;  but  no  individual  will  be  permitted  to  erect 
his  house  upon  or  otherwise  to  appropriate  any 
portion  of  it  to  his  own  private  use. 

The  fact  that  the  appropriation  by  a  private  in- 
dividual to  his  own  use  of  a  portion  of  the  public 
highway  or  of  certain  rights  or  privileges  in  it, 
is  for  the  purpose  of  affording  some  service  to  a 
large  number  of  persons  or  even  to  the  entire  com- 
munity, does  not  in  any  way  affect  his  rights  to 
do  so.  In  either  case  he  is  a  mere  trespasser  upon 
public  property  and  he  has  no  more  right  to  place 
any  obstruction  upon  it,  or  to  attempt  to  exercise 
control  over  any  portion  of  it,  than  he  has  to 
enter  upon  or  to  attempt  to  exercise  the  same  rights 
over  the  private  property  of  an  individual.  The 
public  may  choose  to  grant  to  certain  private  per- 
sons or  corporations  the  right  to  use  a  portion 
of  the  public  highway  or  to  exercise  certain  privi- 
leges in  it  for  the  purpose  of  affording  certain 


Trusts  and  Monopolies.  193 

services  or  conveniences  to  the  community,  but 
their  right  to  exercise  these  privileges  is  derived 
solely  from  the  grant  or  franchise  which  they  re- 
ceived from  the  government,  and  is  in  no  way 
dependent  upon  or  influenced  by  the  amount  of 
capital  which  they  may  have  invested  in  the  con- 
struction or  preparation  of  these  highways,  or  in 
private  properties  which  they  have  placed  under, 
over,  or  upon  them,  or  in  a  business  which  may  be 
entirely  dependent  upon  the  exercise  of  these  privi- 
leges. No  amount  of  investment  of  capital  by  a 
stranger  in  the  private  property  of  an  individual 
will  give  him  a  right  to  claim  any  interest  in  it 
as  against  the  true  owner,  and  it  is  just  the  same 
with  the  property  of  the  public. 

We  may  then  sum  up  the  situation  briefly  as  fol- 
lows: In  those  employments  in  which  no  public 
property  is  employed  and  in  which  no  governmental 
powers  are  exercised  the  rights  of  the  individual 
are  supreme,  so  long  as  they  are  not  used  in  such 
a  manner  as  to  interfere  or  impair  the  rights  of 
any  other  person;  and  the  government  has  no 
right  "to  interfere  with  him  except  in  those  cases  in 
which  it  becomes  necessary  to  take  private  property 
for  the  use  of  the  public,  and  then  only  upon  con- 
ditions which  secure  to  the  owner  full  value  in  re- 
turn for  the  property  taken  and  compensation  for 
any  further  injury  he  may  have  sustained.  The  gov- 
ernment is,  in  these  cases,  further  bound  to  protect 
private  persons  in  the  free  and  full  enjoyment  of 
their  rights  and  is,  in  effect,  the  servant  of  the  in- 
dividual. 
\  In  those  cases,  however,  in  which  public  prop- 
erty is  employed,  in  which  powers  and  privileges 


194  Combinations, 

belonging  solely  to  the  government  are  required  to 
be  exercised,  and  in  which  the  interests  of  the 
whole  community  are  directly  affected,  the  rights 
of  the  public  are  superior  to  every  other  considera- 
tion, and  the  private  individual  or  corporation  who 
devotes  his  time  or  property  to  such  an  employ- 
ment becomes  merely  the  agent  of  the  government, 
and  as  such  he  can  claim  no  rights  in  the  propei^ty 
of  his  principal. 

Much  interest  has  recently  been  manifested  in 
the  discussion  of  the  granting  of  perpetual  fran- 
chises to  railroads,  street  railwa3's  and  other  public 
seryice  corporations,  and  it  may  be  as  well  to  make 
a  few  remarks  on  the  subject  here. 

As  we  have  already  seen,  all  the  collective  powers 
of  the  people,  as  well  as  all  public  property,  are 
vested  by  society  in  the  government  for  the  benefit 
and  protection  of  all  its  citizens.  That  is  to  say, 
all  those  powers  and  privileges  which  are  not  al- 
lowed to  be  exercised  by  each  and  every  individual 
at  his  own  discretion  and  in  his  own  manner  are 
reserved  to  the  government  to  be  exercised  for  the 
common  good  of  all.  It  should  be  carefully  borne 
in  mind,  then,  that  all  the  powers  of  government 
are  derived  from  the  people;  that  they  are  en- 
trusted to  it  for  the  mutual  benefit  of  all ;  that  the 
government  in  exercising  these  powers  is  acting 
merely  as  the  agent  of  the  people  who  support  it 
and  who  owe  allegiance  to  it,  and  of  those  who 
afterward  ratify  its  acts,  and  that  as  such  agent  it 
has  no  power  to  bind  its  principal  by  anything 
done  in  excess  of  the  authority  vested  in  it. 

Thus  the  government  of  to-day  has  authority  to 
act  only  for  the  people  of  to-day,  and  can  bind 


Trusts  and  Monopolies.  195 

future  generations  only  in  so  far  as  they  may  elect 
to  be  bound  by  its  acts,  and  to  avail  themselves  of 
the  benefits  accruing  therefrom.  Nor  can  the  gov- 
ernment bind  the  people  of  to-day  by  any  act  or 
contract  which  is  clearly  prejudicial  to  their  in- 
terests, or  the  terms  of  which  are  obnoxious  to 
them.  The  form  of  government  may  be  changed, 
its  action  may  be  repudiated  by  the  people,  or  it 
may  be  overthrown;  but  the  rights  of  its  citizens 
remain  inalienable,  and  no  power  on  earth  has  any 
authority  to  sell  the  people  into  chattel  slavery  or 
otherwise  to  deprive  them  of  their  liberty,  or  to 
take  away  those  natural  and  civil  rights  which 
make  that  liberty  worth  having.  Any  act  of  the 
government,  therefore,  which  proposes  to  barter 
away  the  interests  of  the  people,  or  in  any  way 
seeks  to  place  control  of  their  affairs  beyond 
their  power,  whether  it  be  for  the  purpose  of 
affording  to  favored  private  individuals  or  cor- 
porations opportunities  of  amassing  great  fortunes 
at  the  expense  of  the  public,  or  to  secure  temporary 
or  permanent  and  substantial  benefits  to  the  people^ 
no  matter  how  valuable  the  consideration  may  be, 
is  contrary  to  natural  justice,  and  can  only  endure 
so  long  as  the  people  are  willing  to  tolerate  it. 

The  reservation  of  these  powers  to  the  govern- 
ment for  the  purpose  of  safeguarding  the  interests 
of  the  people  would  seem,  on  the  face  of  it,  to  im- 
ply that  they  were  to  be  exercised  and  controlled  by 
the  government  itself;  but  it  is  also  clear  that  the 
government  must  act  in  all  matters  through  its 
officers  or  agents,  who  are  to  be  selected  in  some 
manner  not  definitely  determined,  and  that  it  may 
therefore  exercise  these  powers  through  agents  di- 


196  Combinations, 

rectly  appointed  for  the  purpose,  or  let  them  out 
under  terms  to  be  fixed  by  itself,  to  be  exercised 
by  private  individuals  or  corporations  over  which 
it  has  practically  no  control,  if  such  an  arrange- 
ment would  be  consistent  with  the  obligations 
which  the  government  owes  to  the  people  and  with 
the  trust  imposed  in  it. 

Let  us  suppose  that  the  government  were  to  del- 
egate its  police  powers,  such  as  are  now  exercised 
by  marshals,  sheriffs,  constables  and  policemen,  to 
a  private  detective  agency.  It  might  be  urged  that 
these  agencies  are  managed  by  experienced,  practi- 
cal men  who  would  employ  only  competent  per- 
sons. It  is  quite  possible  that  a  much  more  ef- 
ficient service  might  be  secured  in  that  way  than 
is  now  to  be  had  in  many  places,  and  that  it  would 
be  much  more  economical  for  the  government ;  but 
we  know  that  the  people  would  protest  most  ve- 
hemently against  the  placing  of  the  enforcement 
of  the  law  and  the  execution  of  its  writs  in  the 
hands  of  private  individuals,  just  as  they  now  ob- 
ject to  the  exercise  of  police  powers  by  those 
agencies  when  employed  to  protect  mines  or  other 
property  during  strikes,  lockouts,  etc. 

Suppose,  then,  that  the  government  were  to  elect 
to  confide  the  making  of  its  laws  to  a  private  as- 
sociation of  attorneys.  It  might  be  claimed  in  de- 
fense of  this  course  that  it  would  secure  the  mak- 
ing of  wiser  and  better  laws,  that  much  time  and 
money  now  lost  through  the  efforts  of  inexperi- 
enced men  to  secure  the  enactment  of  impractica- 
ble, unconstitutional  and  unsafe  legislation  might 
be  saved,  and  that  the  unseemly  wrangling  and 
manoeuvring  of  party  politicians,  which  occupies 


Trusts  and  Monopolies.  197 

so  mucli  time  in  all  of  our  legislative  assemblies, 
might  be  avoided.  It  is  altogether  likely  that 
many  benefits  might  be  thus  secured,  but  it  would 
be  said  that  in  the  government  by  the  people  they 
should  make  their  own  laws,  and  that  it  is  better 
to  have  poor  laws  made  by  the  people  themselves 
than  to  have  good  laws  imposed  upon  them  in  the 
making  of  which  they  have  had  no  voice. 

Again,  it  might  be  thought  wise  to  turn  the 
management  and  control  of  the  courts  over  to  a 
firm  of  private  attorneys  for  a  certain  number  of 
years.  It  might  then  be  said  that  the  judiciary 
would  thus  be  taken  entirely  out  of  politics,  that 
the  service  of  the  best  legal  talent  might  in  that 
way  be  secured  for  the  bench,  and  that  the  cost  of 
litigation  might  be  greatly  reduced.  It  is  easy  to 
believe  that  many  of  the  abuses  which  are  now 
complained  of,  particularly  in  connection  with  the 
lower  courts,  might  in  that  way  be  remedied,  that 
^the  cost  of  litigation  might  be  reduced,  and  that  a 
much  greater  amount  of  business  might  be  trans- 
acted, the  people  would,  however,  revolt  against 
thus  placing  the  administration  of  justice  into  the 
hands  of  private  individuals,  and  would  never  sub- 
mit to  have  their  rights  adjudicated  by  private 
persons  over  whom  they  have  no  control  and  in 
whose  selection  they  had  no  choice. 

Finally,  suppose  that  in  some  one  of  our  large 
cities  the  government  were  to  become  convinced 
that  it  would  be  a  wise  business  venture,  and  prof- 
itable to  the  whole  community,  to  grant  the  entire 
management  and  control  of  the  city  government 
to  a  well  known  private  business  corporation  for  a 
term  of  twenty  or  thirty  years.    It  might  be  shown 


198  Combinations, 

that  only  in  that  way  could  strictly  business  meth- 
ods be  introduced  into  the  management  of  munici- 
pal affairs,  that  the  ordinary  duties  of  the  govern- 
ment, the  construction  of  public  improvements  and 
the  repair  and  preservation  of  public  property, 
might  be  more  efficiently  and  satisfactorily  con- 
ducted, that  many  additional  accommodations 
might  be  provided  for  the  people,  that  the  finances 
of  the  city  might  be  more  judiciously  and  economi- 
cally expended,  and  that  the  taxes  might  be  re- 
duced. It  is  not  difficult  to  see  how  it  would  be 
possible  for  even  a  very  ordinary  business  corpora- 
tion to  provide  a  much  more  businesslike  adminis- 
tration than  is  now  enjoyed  in  many  of  our  great 
cities,  and  that  many  of  the  reforms  just  indicated 
might  be  effected  without  any  additional  expense 
to  the  people,  while  yet  affording  a  handsome  profit 
to  the  corporation  to  which  the  franchise  of  gov- 
ernment had  been  granted;  but  the  love  of  free- 
dom and  pride  of  self-government  are  too  strong 
in  the  hearts  of  the  people  to  allow  them  to  tolerate 
for  an  instant  the  thought  of  such  a  contract  for 
the  sale  of  their  rights.  It  would  be  contrary  to 
the  instinct  of  a  liberty-loving  people  and  destruc- 
tive of  the  spirit  of  our  free  institutions;  and  tlie 
mere  material  advantages  which  might  doubtless, 
in  many  instances,  be  derived  from  such  a  letting 
out  of  the  powers  of  government  would  be  worth 
nothing  in  comparison  to  the  loss  of  manhood  and 
of  the  rights  and  privileges  of  a  self-respecting  cit- 
izenship resulting  from  such  a  surrender  of  the 
right  of  the  people  to  govern  themselves. 

If,  then,  the  very  thought  of  granting  to  private 
individuals  the  power  to  exercise  these  important 


Trusts  and  Monopolies.  199 

functions  of  government  is  so  repulsive  to  the  peo- 
ple, why  is  the  relinquishing  of  less  important 
powers  of  government  less  distasteful  to  their  sense 
of  honor  and  love  of  principle?  If  the  policy  of 
delegating  the  powers  and  duties  of  government 
to  private  individuals  or  corporations,  when  car- 
ried to  its  natural  and  logical  conclusion  and  full 
development,  becomes  so  subversive  of  the  funda- 
mental principles  of  a  republican  form  of  govern- 
ment, why  is  the  partial  application  of  that  policy 
less  inconsistent  with  these  same  principles?  In 
matters  of  principle  there  can  be  no  question  of 
degree.    The  action  is  either  right  or  wrong. 

Most  of  the  important  functions  of  government 
are  made  up  of  a  number  of  more  or  less  unimpor- 
tant duties,  and  since  the  right  to  delegate  one 
power  implies  the  right  to  delegate  another,  it  is 
clear  that,  even  if  we  assume  that  the  government 
has  the  right  to  assign  merely  its  minor  duties,  a 
government  disposed  to  dispense  its  powers  might 
soon  divest  itself  of  practically  all  of  those  which 
the  people  had  entrusted  to  it. 

It  is  true  that  the  government  has,  as  a  matter 
of  convenience,  in  many  instances  permitted  cer- 
tain of  its  powers  and  duties  to  be  exercised  by  pri- 
vate individuals  or  corporations,  but  these  have 
been,  for  the  most  part,  mere  temporary  arrange- 
ments, to  continue  only  until  such  time  as  the 
government  should  choose  to  assume  the  direct 
discharge  of  such  duties;  or  have  been  grants  for 
a  definite  term  of  years,  upon  conditions  which 
gave  the  government  more  or  less  complete  control 
over  the  individuals  who  were  to  exercise  or  dis- 
oharge  the  duties. 


200  Combinations, 

The  relation  of  the  community  to  the  individuals 
to  whom  franchises  are  granted  is  precisely  the 
game  as  that  of  the  government  to  private  property 
which  has  been  employed  for  public  purposes. 
Thus  private  buildings  are  frequently  employed 
for  use  as  post  offices,  custom  houses,  etc.,  and  if 
the  government  wore  to  take  a  lease  of  one  of  these 
buildings  for  a  reasonable  number  of  years  it  would 
be  bound  by  its  contract ;  but  no  officer  of  depart- 
ment would  have  the  power  to  bind  the  govern- 
ment by  a  perpetual  lease  of  such  a  building.  It 
would  also  be  free  at  any  time  to  erect  its  own 
buildings  and  to  abandon  the  private  property 
which  it  has  hitherto  employed,  subject  only  to  the 
terms  of  such  contract  as  it  had  entered  into  con- 
cerning it. 

By  these  short  term  franchises  the  power  to  reg- 
ulate these  public  services  is  kept  well  within  the 
control  of  the  government;  but  by  perpetual  fran- 
chises it  is  sought  to  place  it  beyond  the  reach  of 
governmental  interference.  The  distinction  is  pre- 
cisely the  same  as  that  which  exists  between  the 
leasing  of  a  man's  property  for  a  term  of  years  and 
the  sale  of  that  property  altogether.  In  the  one 
case  he  retains  a  large  degree  of  control  over  it, 
while  in  the  other,  even  though  certain  reserva- 
tions as  to  its  use  may  be  made  in  the  deed,  he  be- 
comes an  absolute  stranger  to  it. 

It  may  be  urged  that  regulations  as  to  the  range 
of  charges,  the  rates  of  compensation,  the  manner 
of  service,  etc.,  may  all  be  provided  for  in  the  char- 
ter. Provisions,  however,  which  would  be  fair  and 
reasonable  to-day  might  be  very  unjust  under  the 
conditions  which  obtain  fifty  years  from  now,  and, 


Trusts  and  Monopolies.  201 

as  explained  before,  the  government  of  to-day  has 
no  right  to  impose  unreasonable  obligations  upon 
future  generations  or  to  bind  them  by  contracts  for 
which  they  do  not  receive  a  good  and  sufficient  con- 
sideration. No  individual  has  any  power  to  bind 
his  heirs  for  the  payment  of  his  debts,  unless  he 
leaves  them  sufficient  property  out  of  which  to  pay 
them;  nor  can  any  heir  be  compelled  to  accept  an 
inheritance  unless  he  believes  that  it  will  be  to  his 
interest  to  do  so.  It  is  just  the  same  with  the  gov- 
ernment. It  would  seem,  then,  that  a  perpetual 
franchise  could  only  hope  to  be  enforced,  so  long 
as  its  terms  continued  to  be  reasonably  just  to  the 
people. 

,.  If,  now,  it  be  proposed  to  grant  a  perpetual  fran- 
chise, but  to  reserve  to  the  government  the  right  to 
revise  its  provisions  from  time  to  time,  the  gov- 
ernment must  then  possess  the  power  to  revoke  the 
grant  whenever  the  grantee  refuses  to  comply  with 
its  regulations;  else  it  would  be  powerless  to  en- 
force the  acceptance  of  the  revised  conditions. 
I  Having  the  power  to  terminate  the  grant  and  to 
i  impose  new  conditions,  every  readjustment  of  the 
terms  would  be  equivalent  to  the  granting  of  a  new 
'lease,  and  the  franchise  would,  in  fact,  amount  to 
I  but  little  more  than  a  tenancy  at  will,  or  during 
'  good  behavior. 

The  power  of  the  government  to  bargain  away 
any  of  the  rights  and  duties  which  have  been  en- 
trusted to  it  for  the  protection  of  the  people  is 
questioned  by  Chief  Justice  Waite,  in  the  language 
used  in  deciding  the  Railroad  Commission  cases, 
1 116th  United  States  Reports,  page  325,  in  which, 
speaking  for  the  court,  he  says:    ^*This  power  of 


202  Combinations, 

regulation  is  a  power  of  government,  continuing 
in  its  nature,  and  if  it  can  be  bargained  away  at 
all,  it  can  only  be  by  words  of  positive  grant,  or 
something  which  is  in  law  equivalent.  If  there  is 
a  reasonable  doubt,  it  must  be  resolved  in  favor  of 
the  existence  of  the  power."  The  question  in- 
volved in  this  case  was  the  right  of  the  state  to  reg- 
ulate the  charges  of  railroad  companies,  and  while 
the  court  did  not  go  further  in  its  decision  than 
was  necessary  to  decide  the  case  in  hand,  and  found 
in  the  construction  of  the  contract  which  existed 
between  the  state  and  its  chartered  corporations  a 
sufficient  opportunity  to  sustain  the  right  of  state 
control  without  placing  its  decision  upon  broader 
grounds,  the  language  employed  clearly  indicates 
that,  in  the  mind  of  the  court,  the  right  of  the 
state  to  preserve  its  power  of  control  over  all  pub- 
lic service  corporations  rests  upon  much  broader 
principles  of  law,  which  might  be  invoked  when- 
ever the  necessities  of  the  case  might  require  it. 

The  same  principle  was  more  fully  expressed  by 
the  court  in  the  case  of  Stone  versus  Mississippi, 
101st  United  States  Ecports,  page  814,  as  follows: 
"No  legislature  can  bargain  away  the  public  health 
or  the  public  morals.  The  people  themselves  can- 
not do  it,  much  less  their  servants.  The  supervi- 
sion of  both  these  subjects  of  governmental  power 
is  continuing  in  its  nature,  and  they  are  to  be  dealt 
with  as  the  special  exigencies  of  the  moment  may 
require.  Government  is  organized  with  power  to 
provide  for  them.  For  this  purpose  the  largest 
legislative  discretion  is  allowed,  and  the  discretion 
cannot  be  parted  with  any  more  than  the  power  it- 
self."   It  has  again  been  thus  strongly  approved  ia 


Trusts  and  Monopolies.  203 

one  of  the  most  recent  decisions  of  the  court,  the 
opinion  being  delivered  by  Mr.  Justice  Harlan: 
**In  other  cases  we  have  adjudged  that  the  author^ 
ity  given  by  legislative  enactment  to  carry  on  a 
lottery,  although  based  upon  a  consideration  in 
money,  was  not  protected  by  the  contract  clause  of 
the  Constitution,  this  for  the  reason  that  no  state 
may  bargain  away  its  power  to  protect  the  public^ 
morals,  nor  excuse  its  failure  to  perform  a  public 
duty  by  saying  that  it  had  agreed  by  legislative 
enactment  not  to  do  so."  ( Champion  versus  Ames, 
United  States  Reports,  No.  188,  page  321;  also 
Douglas  versus  Kentucky,  United  States  Reports, 
No.  168,  page  488.) 

It  seems  probable,  therefore,  that  the  principle 
of  Ultra  Vires  will  before  long  come  to  be  applied 
to  the  govcrunient  itself,  as  well  as  to  its  minor 
subdivisions  and  to  private  corporations,  and  that 
the  granting  of  franchises  will  not  be  construed  to 
bring  the  matter  within  the  doctrine  of  the  Dart- 
mouth College  case,  except  in  cases  in  which  the 
parties  are  clearly  capable  of  contracting  upon  the 
subject  in  question. 

Perpetual  franchises,  then,  are  contrary  to  the 
spirit  and  purposes  of  the  government  of  a  free 
people,  and  while  there  are  instances  in  which  such 
franchises  have  been  granted  to  private  corpora- 
tions in  various  parts  of  this  country,  their  dura- 
tion, it  is  believed,  will  be  found  to  depend  upon 
the  skill  which  is  displayed  by  their  proprietors 
in  conforming  to  the  wishes  of  the  public. 
4  We  now  come  to  consider  the  conditions  which 
confront  us  at  the  present  time.  Nearly  all  those 
branches  of  public  service  commonly  known  as 


204  Combinations, 

public  utilities,  such  as  railroads,  telegraphs,  tele- 
phones, gas  and  electric  light,  water-works,  street 
railways,  etc.,  are  in  the  great  majority  of  cases 
now  controlled  by  private  corporations.  We  be- 
lieye  that  what  has  already  been  said  of  the  rights 
of  private  individuals  and  of  the  public  in  relation 
to  these  various  forms  of  service  will  be  sufficient 
to  indicate  our  position  on  the  subject,  and  that  it 
is  merely  necessary  to  point  out  the  conditions  in 
order  to  suggest  the  remedy. 

As  we  have  seen,  the  convenience  or  benefit  to 
the  public  is  the  only  justification  for  the  operation 
of  these  services  by  private  individuals.  The  ques- 
tion arises,  then,  is  the  present  service  satisfactory 
to  the  public  ? 

We  will  take  the  street  railway  situation  in  the 
city  of  Chicago  as  an  instance.  In  1883  the  fran- 
chises of  the  principal  lines  of  street  railway  in 
that  city  were  extended  for  a  period  of  twenty 
years,  which  was  the  full  length  of  time  to  which 
they  could  be  extended  under  the  city  charter. 
About  ten  years  later  these  same  companies  began 
to  work  to  secure  a  further  extension  of  time,  and 
to  that  end  they  invoked  the  aid  of  the  State  Legis- 
lature. From  that  time  until  the  present  day  the 
City  Council  has  had  traction  measures  constantly 
before  it  claiming  its'  attention,  committees  and 
commissions  have  been  appointed,  investigations 
made  and  elaborate  reports  returned  upon  the  sub- 
ject. For  ten  years  the  State  Legislature  has  had 
measures  pending  at  every  session  looking  to  some 
settlement  of  the  traction  question  in  the  city  of 
Chicago,  out  of  which  many  scandals  have  arisen 
and  which  have  occasioned  much  loss  of  time  and 


Trusts  and  Monopolies.  205 

expense  to  the  State  Government.  During  that 
time  committees  of  city  officials  and  private  citi- 
zens have  gone  from  Chicago  to  Springfield  to  at- 
tend every  session  of  the  State  Legislature  to  work 
for  or  against  the  passage  of  one  or  more  of  these 
traction  measures ;  for  six  years  the  sole  important 
issue  in  every  municipal  election  held  in  the  city 
has  been  the  traction  question,  and  during  these 
contests  neither  political  party  has  ever  assumed 
the  defense  of  the  local  traction  companies;  hun- 
dreds of  suits  have  been  instituted  by  the  city  gov- 
ernment to  compel  these  companies  to  comply  with 
various  provisions  of  city  ordinances,  most  of 
which  have  been  stubbornly  contested,  and  in 
April,  1902,  the  people  of  the  city  were  asked  to 
vote  by  ballot  for  or  against  municipal  ownership 
of  the  street  car  system.  The  vote  stood  142,826 
for  municipal  ownership  and  27,998  against  it;  the 
question,  however,  was  merely  submitted  to  ascer- 
tain public  sentiment,  and  the  vote  had  no  legal  ef- 
fect whatever.  The  traction  companies  have  ad- 
mittedly allowed  their  properties  to  sink  into  an; 
'intolerable  state  of  neglect  and  inefficiency,  until 
it  is  estimated  that  it  will  require  an  expenditure 
of  from  forty  to  fifty  millions  of  dollars  to  put 
them  in  condition  to  aiford  to  the  people  a  first- 
class,  up-to-date  street  car  service.  The  accommo- 
dation rendered  has  for  several  years  been  very  un- 
satisfactory, and  no  other  subject  since  the  days  of 
the  Spanish-American  War  has  occupied  so  much 
space  in  the  columns  of  the  local  press  as  have  the 
various  phases  of  the  traction  problem.  The  city 
has  recently  secured  the  enactment  of  legislation 
enabling  it  to  enter  into  arrangements  with  the 


2o6  Combinations, 

traction  companies  looking  to  the  early  acquisition 
of  the  street  car  properties  by  the  city,  but  no  set- 
tlement has  been  effected  and  negotiations  for  the 
extension  of  the  company's  franchises  are  still 
pending.  All  this,  at  the  end  of  more  than  forty 
years'  experience  with  the  operation  of  the  street 
icar  system  by  private  corporations,  would  seem  to 
make  it  quite  clear  that  private  ownership  of  pub- 
lic utilities  in  this  instance  has  not  proved  entirely 
satisfactory  to  the  people  of  Chicago. 

The  railroad  systems  of  the  country  are  also 
pwned  and  operated  by  private  corporations,  and 
nearly  every  state  in  the  Union  has  attempted  to 
regulate  their  affairs,  and  to  secure  to  the  people 
a  fair  measure  of  service  at  reasonable  charges,  by 
the  enactment  of  laws  and  the  appointment  of 
boards  for  their  supervision  and  control.  In  spite 
of  these  attempts  on  the  part  of  the  states  to  re- 
strain them,  they  began  to  form  trusts,  pools  and 
combinations  of  various  kinds,  to  discriminate  in 
their  rates  made  to  different  persons  and  between 
different  places,  to  pay  rebates  to  some  and  to 
make  excessively  high  charges  to  others,  all  of 
which  caused  such  general  and  widespread  dissatis- 
faction among  the  people  that  Congress  in  1887  es- 
tablished the  Interstate  Commerce  Commission  for 
the  purpose  of  correcting  these  and  similar  abuses. 

The  result  of  the  labors  of  this  commission,  in 
conjunction  with  the  efforts  of  the  several  s^tate«, 
to  remedy  these  same  evils  may  perhaps  best  be 
judged  from  the  conditions  which  prevailed  during 
the  past  year,  as  shown  by  the  following  expres- 
sions contained  in  the  report  of  the  Interstate 
Commerce  Commission  for  the  year  1902:    "The 


Trusts  and  Monopolies.  207 

tendency  to  combine  continues  to  be  the  most  sig- 
nificant feature  of  railway  development.  The  facts 
in  this  regard  are  matters  of  common  knowledge, 
and  little  is  gained  by  the  mention  of  particular 
instances.  It  is  not  open  to  question  that  the  com- 
petition between  railroad  carriers  which  formerly 
prevailed  has  been  largely  suppressed,  or  at  least 
brought  to  the  condition  of  effective  restraint.  The 
progress  of  consolidation,  in  one  form  or  another, 
will  at  no  distant  day  confine  this  competition 
within  narrow  and  unimportant  limits,  because  the 
control  of  most  railway  properties  will  be  merged 
in  a  few  individuals  whose  common  interests  impel 
them  to  act  in  concert.  While  this  will  insure,  as 
probably  nothing  else  can  in  equal  degree,  the  ob- 
servance of  published  tariffs,  and  so  measurably 
remove  some  of  the  evils  which  the  act  was  de- 
signed to  prevent,  the  resulting  situation  involves 
consequences  to  the  public  which  claim  the  most 
serious  attention.  A  law  which  might  have  an- 
swered the  purpose  when  competition  was  relied 
upon  to  secure  reasonable  rates  is  demonstrably  in- 
adequate when  that  competition  is  displaced  by  the 
most  far  reaching  and  powerful  combinations.  So 
great  a  change  in  conditions  calls  for  corresponding 
change  in  the  regulating  statutes.  .  .  .  Thir- 
ty-eight formal  proceedings,  double  the  number 
brought  in  the  preceding  year,  have  been  instituted 
before  the  commission  since  its  last  report  to  Con- 
gress. These  cases  directly  involve  some  of  the 
rates  and  practices  of  three  hundred  carriers. 
.  .  .  Besides  the  injunction  and  criminal  pro- 
ceedings which  have  been  instituted  at  the  request 
of  the  commission,  ten  civil  cases  to  enforce  orders, 


2o8  Combinations, 

of  the  commission  are  pending  in  the  Federal 
courts." 

We  have  already  referred  to  the  extraordinary 
contract  between  the  railroads  and  the  Standard 
Oil  Trust  by  which  the  railroads  undertook  to  as- 
sist in  crushing  out  the  independent  oil  refiners  by 
charging  them  in  excess  of  the  usual  rates  Tor  car- 
rying their  products,  and  then  paying  over  the  ex- 
cess so  collected  to  the  Standard  Oil  people.  It  i3 
commonly  accepted  as  an  established  fact  that  the 
railroads  continued  to  pay  rebates  to  favored  ship- 
pers, at  least  until  the  establishment  of  the  Inter- 
state Commerce  Commission,  and  most  people  be- 
lieve that  they  have  continued  to  pay  them  until 
very  recently,  if,  in  fact,  they  are  not  still  doing  so. 

Mr.  John  W.  Gates  thus  estimates  the  amount  of 
such  rebates  which  have  been  paid,  and  describes 
the  prosperity  and  business  methods  of  the  railroad 
companies:  "The  amount  of  money  paid  out  by 
railroad  companies  in  rebates  since  the  passage  of 
the  Interstate  Commerce  law  in  1886  would,  in  my 
judgment,  almost  pay  the  national  debt.  What 
has  made  the  railroads  poor  has  been  the  carryincj 
of  people  for  nothing  and  cutting  nominal  tariffs 
actually  in  two  in  many  instances.  The  railroad 
situation  in  the  United  States  to-day,  however,  is 
better  than  ever  in  its  history.  While  rates  are  low, 
they  are  adhered  to.  There  is  not  one  dollar  paid 
out  now  in  rebates  where  two  years  ago  there  were 
perhai)s  one  thousand  or  ten  thousand.  This  ac- 
counts very  largely  for  the  increased  net  earnings 
and  the  supposed  decrease  in  cost  of  operation. 

"People  here  in  Xew  York  have  but  a  remote  idea 
of  the  magnificent  condition  of  most  of  the  rail- 


(.■ 


Trusts  and  Monopolies.  209 

roads  of  the  West,  unless  they  have  traversed  them 
within  the  past  three  or  four  years. 

"The  railroads  have  been  earning  so  much  money 
that  their  greatest  trouble  has  been  to  hide  a  large 
portion  of  their  net  earnings,  and  this  they  have 
done  by  charging  them  to  operating  expenses." 

Thus  we  see  that  private  control  of  public  util- 
ities of  national  interest  and  importance  has  alsQ 
given  much  cause  for  dissatisfaction. 

Instances  of  this  Kind  might  be  multiplied,  and 
much  might  be  said  of  the  dissatisfaction  occa- 
sioned by  private  control  of  the  telegraph,  the  tele- 
phone, of  gas  and  electric  light  plants,  water- 
works, etc.,  but  the  principle  involved  in  all  of  these 
cases  is  precisely  identical  with  that  of  the  rail- 
roads and  street  railway  service,  some  of  the  con- 
ditions of  which  we  have  just  described,  and  the 
same  evils  are  in  a  greater  or  less  degree  common 
to  all  and  require  a  like  remedy.  It  is  not  our 
purpose  to  attempt  to  make  it  appear  that  private 
management  of  public  services  has  in  all  cases 
proved  unsatisfactory  or  injurious  to  the  public; 
we  merely  wish  to  show  that  there  are  instances 
in  which  it  has  proved  to  be  so,  and  to  indicate 
the  remedy  to  be  applied  in  those  cases.  We  leave 
it  to  the  general  knowledge  of  the  reader  to  suggest 
how  many  of  such  cases  there  are  to  be  found.  We 
have  shown  an  instance  of  a  local  street  railway 
system  subject  to  the  jurisdiction  of  city  govern- 
ment, and  of  great  railway  systems  subject  both  to 
fitate  and  federal  jurisdiction,  in  both  of  which 
private  management  has  resulted  in  very  general 
discontent  among  the  people,  and  we  shall  now  tura 


2IO  Combinations, 

our  attention  to  the  consideration  of  the  remedies 
to  be  applied. 

Let  us  first  inquire,  what  is  it  that  gives  rise  to 
this  general  displeasure  with  the  private  control 
of  public  services?  In  the  case  of  the  street  rail- 
way companies  to  which  we  have  referred,  it  was 
the  continual  efforts  of  the  corporations  to  increase 
their  private  gains  by  stinting  the  service  they  af- 
forded to  the  people,  and  by  securing  greater  powers 
and  privileges,  and  longer  leases  of  their  right  of 
way.  In  the  case  of  the  railroads,  it  was  the  unfair 
methods  resorted  to  by  the  companies  to  increase 
their  profits.  Thus  we  see  that  in  both  instances 
it  :was  private  interest  that  inspired  the  persistent 
opposition  to  the  will  of  the  people,  and  which 
prompted  the  corporations  to  render  the  most  in- 
ferior service  that  would  be  tolerated  by  the  muni- 
cipalities in  return  for  the  grants  which  they  had 
received. 

What,  then,  is  the  remedy  which  would  natu- 
rally suggest  itself?  Eliminate  private  interest 
from  the  problem  and  you  have  removed  the  chief 
cause  of  all  the  evils  of  which  we  now  hear  com- 
plaints in  connection  with  the  operation  of  public 
services.  We  have  already  seen  from  our  analysis 
of  the  rights  of  the  individual  and  of  the  com- 
munity, that  all  proprietary  rights  in  these  various 
services,  as  well  as  the  duty  of  providing  tliem,  be- 
long to  the  community.  There  can,  therefore,  be 
no  valid  objection  to  the  right  of  the  government  to 
dispense  with  the  services  of  private  individuals  or 
corporations  in  connection  with  these  public  duties 
whenever  their  management  of  them  ceases  to  be 
beneficial  to  the  public. 


Trusts  and  Monopolies.  211 

The  natural  obligation  which  rests  upon  the 
government  to  provide  for  the  people  all  those  forms 
of  public  service  which  the  very  structure  and  or- 
ganization of  society  forbids  and  prevents  any  in- 
dividual or  group  of  individuals  from  providing 
without  the  sanction  and  assistance  of  the  govern- 
ment; the  ownership  and  control  of  the  only  ave- 
nues through  which  it  is  possible  to  afford  these 
services  to  the  people;  the  supervision  and  control 
which  it  is  absolutely  necessary  for  it  to  maintain 
over  these  services  no  matter  by  whom  they  may  be 
provided ;  and  the  great  difficulty  of  procuring  the 
most  efficient  service  from  private  individuals 
wherever  their  personal  interests  become  directly 
opposed  to  the  public;  all  serve  to  indicate  it  to 
be  the  imperative  duty  of  the  government  to  assume 
the  direct  management  and  control  of  all  these  sev- 
eral forms  of  public  service. 

That  the  assumption  of  these  duties  by  govern- 
ment is  correct  in  theory,  has,  we  believe,  already 
been  made  sufficiently  clear  by  what  has  been  said 
of  the  close  relationship  of  such  services  to  the 
functions  of  government,  and  of  the  nature  of  the 
duties  to  be  discharged.  The  Government  of  the 
United  States  has  recognized  it  to  be  the  duty  of 
the  government  to  provide  these  services,  by  grant- 
ing millions  of  acres  of  the  public  land  and  lending 
its  own  credit  to  private  corporations  for  the  pur- 
pose of  encouraging  the  construction  of  railroads 
and  canals,  and  the  practicability  of  government 
operation  of  these  public  necessities  would  seem  to 
be  sufficiently  demonstrated  by  the  numerous  well 
known  instances  both  in  this  country  and  Europe 
in  which  nearly  every  form  of  these  services  has 


212  Combinations 


for  years  been  owned  and  operated  by  municipali- 
ties. 

There  are  those,  however,  who  question  the  ex- 
pediency of  the  government  undertaking  the  direct 
management  of  street  railways  and  other  branches 
of  service,  in  which  great  amounts  of  capital  are 
involved  and  large  numbers  of  persons  are  em- 
ployed. They  do  not  question  the  correctness  of 
the  principle,  of  the  right  of  government  to  assume 
the  discharge  of  such  duties ;  but  they  say  that  our 
municipal  governments  are  too  loosely  managed, 
that  they  are  too  new  and  inexperienced,  and  too 
much  subject  to  change  and  manipulation  by  par- 
tisan politicians  to  be  intrusted  with  the  manage- 
ment of  the  affairs  of  a  great  business  enterprise. 

Thus  it  is  thought  by  many  that  it  would  be 
impracticable  for  the  city  of  Chicago  to  undertake 
to  operate  its  own  street  railway  system.  Yet  these 
same  people  think  nothing  of  establishing  a  sanitary 
district,  comprising  territory  lying  largely  within 
the  limits  of  the  city  and  controlled  by  the  votes  of 
the  same  citizens,  from  which  is  elected  a  board  of 
six  trustees  which  is  given  the  power  to  levy  taxes 
and  to  expend  forty  or  fifty  millions  of  dollars  in 
the  construction  and  operation  of  a  canal — an 
amount  which  would  be  more  than  sufficient  to  re- 
produce the  entire  street  car  system  of  the  city 
as  it  stands  to-day. 

It  is  admitted  that  municipal  ownership  may 
work  well  enough  in  England,  Scotland  and  Ger- 
many where  government  is  old  and  settled  in  its 
way,  and  not  likely  to  be  influenced  by  the  enthu- 
siasm and  impetuosity  of  youth;  but  we  are  told 
that  under  our  form  of  government,  the  placing 


Trusts  and  Monopolies.  213 

of  so  much  power  in  the  hands  of  the  adminis- 
tration is  apt  to  lead  to  the  building  up  of  strong- 
political  machines  at  the  expense  of  the  public  serv- 
ice; that  the  appointment  of  politicians  to  more 
responsible  positions  would  lead  to  greater  corrup- 
tion and  mismanagement,  and  that  the  employ- 
ment and  control  of  so  great  a  number  of  voters 
would  give  to  any  political  party  a  very  material 
advantage  in  its  attempts  to  perpetuate  itself  in  , 
power.  ■  > 

As  to  the  capacity  of  our  municipalities  to  eon-      ^ 
duct  their  own  public  works  in  a  thoroughly  busi- 
nesslike and  satisfactory  manner,  we  wish  to  re-       ';' 
mind  the  reader  that  the  ability  of  the  American       : 
people  to  govern  themselves  was  also  denied  at  the       j 
time  of  the  Amerrfcan  revolution,  and  the  same 
thing  has  been  said  of  every  nation  which  has  ever 
attempted  to  establish  a  republican  form  of  govern- 
ment.     In    this    case,    however,    it    is    the    same 
American  people,  or  their  descendants,  who  have 
proven  to  the  world  their  ability  to  govern  them- 
selves, who  now  question  their  own  ability  to  con- 
duct certain  minor  forms  of  public  service  which 
are  merely  designed  to  contribute  to  their  own  per- 
sonal convenience  and  comfort.  ^ 

But  what  is  it  that  renders  our  people  incapable 
of  discharging  these  duties?     It  is  not  the  power 
to  do  so  that  is  denied,  for  that  is  admitted;  it  is  i 
not  the   intellectual   capacity,   for  much   greater  ; 
things  have  been  successfully  undertaken ;    it  is 
not  the  want  of  business  experience,  for  the  serv-  ' 
ices  of  the  very  same  men  who  are  now  employed 
to  manage  these  properties  could  be  secured  by  the  _ 
government  as  well  as  by  private  corporations,  and 


214  Combinations, 

the  entire  staff  of  employees  might  be  retained,  if 
desired.  It  is,  then,  their  honesty  that  is  called 
in  question.  If  the  honesty  of  the  American  peo- 
ple can  be  trusted  with  the  protection  of  our  lives 
and  property ;  if  it  has  built  up  the  greatest  govern- 
ment that  the  world  has  ever  known  and  preserved 
its  national  institutions  throughout  a  century  and  a 
quarter,  free  from  corruption,  and  true  to  the  pur- 
poses of  their  creation,  surely  it  can  be  trusted  with 
the  management  of  a  local  street  car  line  or  water 
works. 

Numerous  instances  of  dishonesty  in  public  life 
are  to  be  found,  it  is  true,  but  these  may  be  shown 
to  exist  under  every  form  of  government,  and  are 
not  peculiar  to  our  own.  Dishonesty  is  also  to  be 
met  with  in  the  management  of  private  affairs,  and 
our  state  penitentiaries  are  filled  with  examples. 
AVhen  an  employee  of  a  private  corporation  is 
found  to  be  dishonest,  he  may  be  promptly  pun- 
ished ;  but  when  the  corporation  itself  is  dishonest 
in  its  dealings  with  the  public,  it  cannot  be  ef- 
fectively punished  so  long  as  it  is  allowed  to  re- 
main in  control  of  the  public  service.  When,  on 
the  other  hand,  an  employee  of  the  government 
is  found  to  be  dishonest  he  may  also  be  speedily 
punished ;  but  if  the  administration  of  the  govern- 
ment itself  is  found  to  be  dishonest,  it  may  be 
promptly  removed  by  the  votes  of  the  people. 

Dishonesty  in  private  corporations  which  are 
operating  public  services  may,  and  undoubtedly, 
does  exist  in  spite  of  the  efforts  of  the  government 
to  prevent  it,  but  dishonesty  in  governmental  af- 
fairs can  only  exist  so  long  as  the  people  are  willing 
to  tolerate  it. 


Trusts  and  Monopolies.  215 

The  American  people  have  thus  far  proved  equal 
to  every  emergency  which  has  been  encountered  and 
it  is  believed  that  they  will  not  now  be  found  in- 
capable of  managing  their  own  local  affairs.  Greater 
difficulties  inspire  more  determined  efforts,  and  in- 
creasing responsibilities  suggest  more  perfect  safe- 
guards ;  and  with  the  development  and  application 
of  a  thorough  and  practical  civil  service  system 
to  the  affairs  of  municipalities,  there  would  seem 
to  be  no  reason  why  they  should  not  be  capable  of 
managing  all  their  various  forms  of  public  service. 

As  has  already  been  suggested,  one  or  more  forms 
of  these  public  utilities  have  for  years  been  operated 
by  municipalities  in  various  parts  of  this  country; 
but  even  in  those  localities  in  which  one  class  of 
service  has  been  successfully  and  satisfactorily  con- 
ducted, the  same  objections  are  made  to  the  exten- 
sion of  municipal  ownership  to  other  branches. 
Thus,  in  the  city  of  Chicago,  although  the  public 
water  service  has  been  owned  and  operated  by  the 
city  government  for  more  than  fifty  years  to  the  en- 
tire satisfaction  of  the  people,  and  while  no  one 
would  now  think  of  transferring  this  service  to 
private  management,  yet  there  has  been  a  consider- 
able protest  made  against  the  extension  of  munici- 
pal control  so  as  to  include  the  street  car  system. 
The  prevailing  sentiment,  however,  appears  to  be 
in  favor  of  acquiring  this  service  at  the  earliest 
practical  date. 

It  is  the  custom  of  this  class  of  objectors  to 
compare  some  weak  point  of  municipal  operation, 
not  with  the  accommodation  furnished  by  individ- 
uals in  some  similar  service,  but  with  some  par- 
ticular feature  of  the  management  of  strictly  pri- 


2i6  Combinations, 

vate  property;  such  as  to  contrast  the  erection  of 
public  buildings  when  clone  directly  by  the  govern- 
ment, with  the  speed  with  which  similar  structures 
are  erected  by  private  parties.  This  comparison 
is  manifestly  unfair,  for  in  the  case  of  individual 
property,  every  consideration  requires  the  proprie- 
tor to  use  the  utmost  care  and  most  skillful  manage- 
ment ;  whereas  in  the  operation  of  public  property 
by  private  persons,  the  controlling  purpose  is  to 
get  the  most  out  of  it  in  the  shortest  time,  lest  it 
be  taken  from  them.  If  comparisons  are  to  be 
made,  they  should  be  with  the  management  of  pub- 
lic property  by  private  corporations,  and  then,  even 
in  the  case  of  the  erection  of  the  public  buildings 
referred  to,  if  the  comparison  is  made  with  the 
numerous  delays  and  innumerable  devices  which 
are  resorted  to,  in  order  to  procure  extensions  of 
time  and  additional  expenditures  of  money,  which 
are  so  common  in  the  constructioij  of  public  build- 
ings by  private  contractors,  it  will  not,  it  is  be- 
lieved, appear  so  entirely  discreditable  to  the  show- 
ing made  by  government  work. 

The  operation  of  the  postal  system  by  the  United 
States  Government  would  seem  to  afford  a  sufficient 
answer  to  those  who  fear  the  use  of  the  patronage 
thus  afforded  for  political  purposes.  Tens  of  thou- 
sands of  men,  who  belong  to  every  political  party, 
are  there  employed  throughout  the  changing  ad- 
ministrations of  government,  but  with  the  aid  of 
a  rigid  civil  service  system,  they  are  kept  practi- 
cally free  from  political  control,  and  afford  but 
slight  aid  to  the  administration  in  matters  of  parti- 
san politics.  It  is  safe  to  say  that  the  employees  of 
the  Post  Office  Department  are  much  less  obedient 


Trusts  and  Monopolies.  217 

to  the  political  dictation  of  the  administration  in 
power,  than  are  the  employees  of  private  corpora- 
tions which  have  received  special  favors  from  the 
government. 

While  these  are  among  the  objections  usually  re- 
lied upon  in  opposing  municipal  ownership  of  pub- 
lic utilities,  it  is  believed  that  the  fear  of  invading 
the  domain  of  private  enterprise  is  the  one  which 
has  had  the  most  influence  with  the  people  at 
large,  and  it  is  chiefly  to  anticipate  this  objection 
that  we  have  entered  into  so  extended  an  analysis 
of  the  rights  and  powers  of  government.  We  have 
attempted  to  show  from  the  very  nature  of  these 
public  services  that  the  duty  of  providing  them 
rests  primarily  upon  the  government,  and  that  the 
letting  of  them  to  be  operated  by  private  individuals 
is  a  mere  secondary  consideration  which  is  neces- 
sarily temporary  in  its  duration;  that  the  dis- 
charge of  these  duties  is,  therefore,  a  governmental 
function  no  matter  by  whom  they  may  be  per- 
formed, and  the  government  has  an  absolute  right 
to  regulate  them,  and  to  change  its  methods  of 
performing  them  whenever  it  sees  fit  to  do  so.  It 
will,  of  course,  be  understood  that  it  is  not  pro- 
posed to  take  any  of  the  property  of  private  in- 
dividuals which  may  have  been  used  in  connection 
with  the  operation  of  these  services  without  making 
due  compensation  therefore,  as  required  by  law. 

We  thus  show  that  these  services  are  proper  func- 
tions of  government,  and  make  a  distinction  be- 
tween the  service  itself  and  the  property  used  in 
connection  with  it,  and  between  the  right  of  the 
public  to  control  the  service  and  its  right  to  con- 
trol the  property  employed  in  it,  believing  that 


2i8  Combinations, 

when  the  people  understand  the  true  extent  to  which 
the  community  may  justly  go  in  its  control  of  pub- 
lic affairs,  and  realize  that  there  is  no  danger  of 
any  encroachment  upon  the  natural  field  of  private 
business,  they  will  unhesitatingly  demand  muni- 
cipal ownership  and  control  of  all  forms  of  public 
service. 

In  making  this  distinction  between  the  service 
rendered  by  quasi-public  corporations,  and  the  prop- 
erty employed  in  connection  with  it,  we  have  de- 
parted somewhat  from  the  usual  custom  of  writers 
upon  the  subject ;  but  it  is  believed  that  it  will  be 
found  to  be  in  perfect  accord  with  the  spirit  of  the 
decisions  of  the  courts  and  the  principles  an- 
nounced by  the  best  writers,  if  not  always  in  entire 
harmony  with  the  language  employed. 

Thus,  the  point  established  by  these  decisions  is 
the  power  of  government  to  regulate  the  charges 
and  manner  of  service  afforded  by  these  quasi- 
public  corporations.  On  this  proposition  the  Su- 
preme Court  of  the  United  States  was  unanimous, 
and  is  supported  by  the  leading  jurists  and  text 
writers.  In  the  case  of  Munn  versus  Illinois,  94 
United  States  Report,  page  311,  however,  which  is 
the  leading  ca«e  upon  the  subject,  the  Supreme 
Court  of  the  United  States  expressed  itself  as  fol- 
lows: "It  has  been  customary  in  England  from 
time  immemorial,  and  in  this  country  from  its 
first  colonization,  to  regulate  ferries,  common  car- 
riers, hackmen,  bakers,  millers,  wharfingers,  inn- 
keepers, etc.,  and  in  so  doing  to  fix  a  maximum  of 
charge  to  be  made  for  services  rendered,  accom- 
modations furnished  and  articles  sold.  To  this  day 
statutes  are  to  be  found  in  many  of  the  states  upon 


Trusts  and  Monopolies.  219 

some  or  all  these  subjects ;  and  we  think  it  has  never 
yet  been  successfully  contended  that  such  legisla- 
tion came  within  any  of  the  constitutional  prohibi- 
tions against  interference  with  private  property. 

^'When,  therefore,  one  devotes  his  property  to  a 
use  in  which  the  public  has  an  interest,  he  in  effect 
grants  to  the  public  an  interest  in  that  use  and  must 
submit  to  be  controlled  by  the  public  for  the  com- 
mon good  to  the  extent  of  the  interest  he  has  thus 
created.  He  may  withdraw  his  grant  by  discon- 
tinuing the  use,  but  so  long  as  he  maintains  the 
use  he  must  submit  to  the  control." 

The  court  would  thus  appear  to  have  emphasized 
the  right  of  the  government  to  exercise  a  certain 
amount  of  control  in  private  property  which  is  de- 
voted to  a  public  use,  and  this  has  given  rise  to  much 
adverse  criticism  of  the  decision.  It  is  said  that  the 
right  of  private  property  is  as  sacred  as  the  right 
of  life  and  liberty,  and  that  the  government  is 
equally  bound  to  protect  the  individual  in  the  en- 
joyment of  it.  The  power  of  the  government  to 
regulate  the  charge  or  compensation  which  a  per- 
son shall  receive  for  the  use  of  his  property  is 
said  to  be  in  fact  the  right  to  deprive  him  of  the 
fruits  of  his  property  and  of  all  that  makes  it  useful 
or  desirable  to  him,  leaving  him  merely  the  empty 
title,  and  that  it  amounts  to  a  virtual  confiscation 
of  his  property  under  the  guise  of  regulation.  It 
is  declared  to  be  subversive  of  the  rights  of  private 
property  and  to  destroy  practically  all  the  guaran- 
ties of  the  Constitution  and  of  the  common  law 
invoked  for  the  protection  of  vested  corporate 
rights. 

Speaking  of  Munn  versus  Illinois  and  the  Granger 


220  Combinations, 

Cases,  Mr.  W.  P.  Wells,  in  his  treatise  entitled 
The  Dartmouth  College  Case  and  Private  Corpora- 
tions, 9  Am.  Bar  Assoc.  Rep.,  229,  says ;  "The  de- 
cisions seem  to  us  to  be  subversive  of  the  rights  of 
private  property,  heretofore  believed  to  be  pro- 
tected by  constitutional  guaranties  against  legisla- 
tive interference;  they  hold  that  all  property  and 
all  business  of  the  state  are  held  at  the  mercy  of 
the  legislature ;  they  deprive  private  and  corporate 
owners  of  their  property  absolutely,  although  under 
the  guise  of  mere  regulations  as  to  its  use  and  em- 
ployment and  non-interference  with  its  title  and 
possession."  Referring  to  the  decisions  in  the 
Railway  Commission  Cases,  116  U.  S.,  307,  which 
affirm  the  same  principle,  and  to  the  dissenting 
opinions  of  Justices  Harlan  and  Field,  he  contin- 
ues :  "These  decisions  assert  principles  which  have 
not  received,  and,  as  we  believe,  cannot  receive,  the 
assent  of  the  most  weighty  professional  opinion. 
The  reasoning  of  the  dissenting  opinions  seems  to 
be  unanswerable.  These  express  with  cogent  logic, 
abundant  authority  and  masterly  strength  the  con- 
sequences of  a  doctrine  that  the  legislative  power 
can  be  unchecked  in  its  interference  with  business 
essentially  private,  or  its  prescription  of  the  com- 
pensation which  private  and  corporate  owners 
Bhall  receive  for  the  use  of  their  property." 

The  court  in  Munn  versus  Illinois  quotes  high 
English  authorities  in  which  similar  language  is 
employed  and  which  shows  that  the  right  of  the 
government  to  regulate  the  use  of  property  which 
has  been  dedicated  to  a  public  use,  has  been  recog- 
nized by  the  common  law  for  the  last  three  hundred 
years;  but  the  point  which  the  court  had  in  mind 


Trusts  and  Monopolies.  22ii 

in  these  cases,  as  well  as  in  the  other  cases  cited,  was 
clearly,  the  regulation  of  the  service,  and  not  the 
property.  The  property  is  regarded  as  a  tangible 
representative  of  the  service,  which  must  be  oper- 
ated upon  in  order  to  control  the  service;  it  is 
merely  an  incident  to  the  service  and  not  an  in- 
dependent object  which  is  sought  to  be  controlled. 

It  is  said  that  property  becomes  clothed  with  a 
public  interest  when  used  in  a  manner  to  make  it 
of  public  consequence  and  to  affect  the  community 
at  large;  but  while  the  power  to  regulate  these 
properties  is  said  to  be  fundamental  with  the  gov- 
-ernment,  the  public  interest  in  them  is  admitted 
to  be  so  slight  that  it  may  be  destroyed  at  the  pleas- 
ure of  the  individual  proprietors.  They  may  as- 
sign, remove,  destroy,  or  otherwise  withdraw  their 
property  from  use  without  the  leave  or  assent  of 
the  public,  and  in  any  of  these  cases  the  interest  of 
the  public  is  said  to  be  terminated.  Thus,  the 
dignity  of  this  power  appears  to  be  entirely  dispro- 
portionate to  the  interests  or  title  of  the  government 
to  the  property  over  which  it  is  supposed  to  be  exer- 
cised, and  upon  the  existence  of  which  it  would 
seem  to  depend. 

But  the  power  to  regulate  does  not  cease  with 
the  destruction  of  the  tangible  property.  The  ferry 
may  be  destroyed,  but  the  power  to  regulate  the 
carrying  of  persons  and  property  across  the  stream 
remains,  and  the  duty  to  provide  another  ferry 
or  bridge,  continues  to  rest  upon  the  government. 
It  is  therefore  the  service,  and  not  the  property 
which  the  government  seeks  to  regulate;  and  it  is 
that  which  the  courts  have  had  in  mind. 

Mr.  Justice  Field  dissented  from  the  finding  of 


222  Combinations, 

the  court  in  the  case  of  Munn  versus  Illinois,  in 
an  elaborate  opinion  in  which  he  was  joined  by 
Mr.  Justice  Strong.  After  assenting  to  the  propo- 
sition that  government  has  a  right  to  control  pri- 
vate property  which  has  been  regularly  dedicated 
to  a  public  use,  he  disagrees  with  a  more  general 
statement  that  property  becomes  clothed  with  a 
public  interest  whenever  it  is  used  in  a  manner  to 
make  it  of  public  consequence.  He  said  that  the 
right  to  regulate  private  property  meant  the  right 
to  take  the  beneficial  interest  of  that  property, 
and  that  to  give  to  legislatures  the  power  to  deter- 
mine when  property  became  so  clothed  with  a  pub- 
lic interest  and,  therefore,  subject  to  governmental 
control,  was  to  destroy  for  all  useful  purposes  the 
eflBciency  of  the  constitutional  guaranties. 

The  particular  point  at  issue  in  the  case  was 
whether  the  grain  elevators  of  the  city  of  Chicago 
constituted  such  a  public  service  as  to  bring  them 
within  the  power  of  the  state  to  control  their 
charges.  The  court  held  that  they  did,  but  the  dis- 
senting opinion  maintained  that  the  rule  an- 
nounced by  the  court  for  determining  the  right  of 
government  to  control  private  property,  was  so 
broad  and  indefinite  that  it  might  be  extended  so 
as  to  include  nearly  every  form  of  private  property 
that  became  in  any  way  serviceable  to  the  public; 
that  the  operation  of  grain  elevators  was  not  a  form 
of  public  service  known  to  the  common  law;  that 
it  was  conducted  by  private  persons  upon  private 
property ;  that  no  franchise  or  grant  was  received 
from  the  government ;  that  no  public  property  was 
employed  in  connection  with  it;  and  that  it  did 
not  fall  within  any  rule  that  would  not  be  equally 


Trusts  and  Monopolies.  223 

applicable  to  almost  every  form  of  private  business. 

The  criticism  of  the  case,  then,  has  chiefly  been 
based  upon  the  declared  right  of  government  to 
regulate  certain  classes  of  private  property,  an^  the 
fear  of  the  extension  of  that  power  so  as  to  abro- 
gate all  the  safeguards  which  have  been  established 
for  the  protection  of  the  rights  of  private  property. 
But  in  spite  of  the  storm  of  criticism  with  which  it 
has  been  assailed,  the  principle  announced  in  the 
case  has  been  ever  since  sustained,  and  has  not  been 
extended  in  its  application  beyond  that  class  of 
cases  which  we  may  reasonably  presume  to  have 
been  contemplated  by  the  court. 

Let  us  then  inquire  whether  the  difference  be- 
tween the  court  and  its  critics  has  not  rather  been 
one  of  definition,  than  of  principle. 

The  following  extract  from  the  opinion  of  Lord 
Ellenborough  in  the  case  of  Alnutt  versus  Inglis, 
12  East.,  537,  decided  in  1810,  was  approvingly 
quoted  both  in  the  opinion  of  the  court  and  in  the 
dissenting  opinion  of  Mr.  Justice  Field ;  and  as  it 
would  therefore  seem  to  contain  the  principle 
which  the  whole  court  had  in  mind,  the  difficulty 
in  reaching  the  unanimous  decision  appears  to 
have  been  in  construing  it  and  applying  it  to  the 
affairs  of  to-day. 

"There  is  no  doubt  that  the  general  principle  is 
favored,  both  in  law  and  justice,  that  every  man 
may  fix  what  price  he  pleases  upon  his  own  prop- 
erty, for  the  use  of  it ;  but  if  for  a  particular  pur- 
pose, the  public  have  a  right  to  resort  to  his  prem- 
ises and  make  use  of  them,  and  he  have  a  mo- 
nopoly in  them  for  that  purpose,  if  he  will  take  the 
benefit  of  that  monopoly  he  must,  as  an  equivalent. 


224  Combinations, 

perform  the  duty  attached  to  it  on  reasonable 
terms." 

After  quoting  this  passage  Justice  Field  ob- 
serves that  in  this  case  it  was  the  grant  from  the 
government  together  with  the  use  which  clothed  the 
property  with  a  public  interest.  This  was  undoubt- 
edly, in  a  sense,  true  of  the  particular  case  in  ques- 
tion, for  that  particular  monopoly  was  created  by 
royal  grant;  but  it  will  be  readily  perceived  that 
the  language  of  Lord  Ellenborough  clearly  an- 
nounces a  much  broader  principle.  It  is  there  de- 
clared to  be  the  monopoly,  together  with  the  use, 
which  creates  the  public  interest,  and  that  is  just 
as  true  to-day  as  it  was  when  announced  nearly 
one  hundred  years  ago ;  and  it  makes  no  difference 
whether  the  monopoly  be  created  by  governmental 
grant  or  otherwise. 

That  the  court  in  Munn  versus  Illinois  had  this 
rule  in  mind,  is  shown  by  the  reproduction  of  it 
in  the  opinion  of  the  court,  and  by  the  statement 
that  the  elevators  in  question  had  acquired  a  virtual 
monopoly  of  the  business  in  the  city  of  Chicago, 
that  the  entire  business  was  controlled  by  a  few 
men  who  fixed  prices  at  the  beginning  of  the  year 
to  which  all  were  obliged  to  conform,  that  com- 
petition was  destroyed,  and  that  the  public  was 
compelled  to  submit  to  their  terms. 

The  rule  laid  down  by  Lord  Ellenborough,  then, 
appears  to  include  all  that  was  intended  to  be  af- 
firmed by  the  Supreme  Court  of  the  United  States 
in  Munn  versus  Illinois,  and  since  it  defines  the 
means  by  which  it  may  be  determined  with  reason- 
able certainty  the  limits  to  which  governmental 
control  may  be  extended,  and  is  not,  therefore, 


Trusts  and  Monopolies.  225 

open  to  the  same  criticism  to  which  that  case  has 
been  subjected,  it  would  seem  to  be  a  much  more 
appropriate  statement  of  the  law  than  that  adopted 
by  our  court.  It  will  also  be  further  observed  that 
this  definition  of  Lord  Ellenborough  eliminates 
the  idea  of  governmental  control  of  private  prop- 
erty, and  deals  directly  with  the  subject  proposed 
to  be  regulated,  which  is  the  service. 

We  thus  find  a  highly  authoritative  statement  of 
the  law  in  perfect  accord  with  the  views  which  we 
have  already  expressed ;  that  government  possesses 
the  power  to  protect  its  people  against  every  in- 
fringement of  their  rights,  and  that  it  is  its  duty 
to  regulate  and  control  all  those  forms  of  public 
service  which  the  very  organization  of  society  re- 
quires to  be  kept  equally  accessible  to  all  its  mem- 
bers. 

This  rule  which  has  stood  as  the  definition  of  the 
common  law  upon  the  subject  for  nearly  a  century, 
is  safe,  yet  comprehensive.  It  assures  the  people 
against  the  fear  of  governmental  interference  in 
the  affairs  of  private  business ;  it  encourages  them 
to  allow  to  the  government  the  full  measure  of 
power  necessary  to  insure  the  best  possible  manage- 
ment of  all  public  affairs,  and  secures  to  the  govern- 
ment complete  power  to  control  monopolies  of  every 
kind  wherever  they  may  be  found. 

"There  is  no  doubt  that  the  general  principle  is 
favored  both  in  law  and  justice,  that  every  man 
may  fix  what  price  he  pleases  upon  his  own  prop- 
erty, for  the  use  of  it ;  but  if,  for  a  particular  pur- 
pose, the  public  have  a  right  to  his  premises  and 
make  use  of  them,  and  he  have  a  monopoly  in  them 
for  that  purpose,  if  he  will  take  the  benefit  of  that 


226  Combinations, 

monopoly  he  must,  as  an  equivalent,  perform  the 
duty  attached  to  it  on  reasonable  terms."  This  is 
sound  law.  It  means  that  the  government  is  com- 
petent to  protect  every  interest  of  its  citizens ;  that 
whenever  any  person  secures  a  monopoly  of  any 
service  or  commodity  which  is  necessary  to  the  com- 
fort or  convenience  of  the  public,  no  matter  in 
what  way  that  monopoly  may  have  been  acquired, 
he  thereby  makes  his  business  subject  to  govern- 
mental regulation  and  control  for  the  benefit  of  all 
who  are  dependent  upon  its  products;  and  in  af- 
fording this  protection  and  regulation,  it  may  as- 
sume the  ownership  and  operation  of  any  or  all 
of  these  public  interests  whenever,  in  its  judg- 
ment, the  best  interests  of  the  people  and  the  wel- 
fare of  the  community  may  seem  to  require  it  to  do 
so. 


Trusts  and  Monopolies.  227 


CHAPTER  IX. 

MONOPOLIES  AND  THE  TARIFF. 

In  considering  the  relations  between  monopolies 
and  the  tariff,  we  have  no  intention  of  allowing 
ourselves  to  be  drawn  into  any  discussion  of  the 
merits  of  the  protective  system  in  its  general  ap- 
plication, or  of  the  relative  merits  of  protection 
or  free  trade.  We  wish  to  keep  constantly  before 
our  minds  the  fact  that  monopoly  is  the  central 
subject  of  our  investigation,  and  that  we  are  to 
study  the  tariff  merely  to  determine  wherein  it 
may  tend  to  create,  promote,  perpetuate,  assist, 
or  otherwise  affect  monopolies.  In  pursuing  this 
inquiry,  we  wish  our  readers  to  lay  aside  for  the 
time,  whatever  feelings  of  political  friendship  or 
antipathy  they  may  have  associated  with  the  policy 
of  protection,  and  to  examine  this  question  strictly 
upon  its  merits,  regardless  of  how  their  conclusions 
may  prove  to  coincide,  or  be  at  variance  with  their 
views  respecting  the  policy  in  general.  We  wish 
them  to  look  upon  the  protection  afforded  to  mo- 
nopolies as  a  new  application  of  the  principle,  and 


228  Combinations, 

one  which  was  not  contemplated  by  the  founders  of 
"the  protective  theory,  and  to  examine  it  impar- 
tially, with  no  disposition  to  question  the  motives  or 
good  intentions  of  those  who  framed  the  tariff 
laws ;  also,  with  no  reference  to  the  question  as  to 
whether  protection  should,  or  should  not,  continue 
to  be  afforded  to  the  manufacturers  of  articles 
which  are  not  controlled  by  monopolies. 

Monopoly,  in  the  first  instance,  depends  upon 
the  ability  to  secure  control  of  a  sufficiently  large 
percentage  of  a  commodity  to  enable  the  would-be 
monopolist  virtually  to  control  the  market  for  that 
article.  Thus,  a  concern  which  controls  from  sixty 
to  eighty  per  cent,  of  the  production  of  petroleum, 
can  very  largely  dictate  prices,  and  prescribe  the 
conditions  under  which  its  rivals  must  do  busi- 
ness. 

The  ability  to  secure  control  of  such  a  percentage 
of  a  given  commodity,  depends  upon  the  available 
supply  of  it  in  the  market,  the  abundance  and  dis- 
tribution of  the  raw  materials  of  which  it  is  made„ 
and  the  difficulties  attendant  upon  the  production 
of  the  finished  product.  Thus,  the  greater  the 
supply  the  more  difficult  it  will  be,  and  the  greater 
amount  of  capital  will  be  required  to  make  it 
possible  to  purchase  a  sufficient  quantity  to  be  able 
to  control  the  market;  but  even  the  greatest  sup- 
ply must  eventually  become  exhausted  or  insuffi- 
cient, and  the  power  of  the  monopolist  must  ulti- 
mately depend  upon  his  ability  to  control  the 
sources  of  production,  and  the  supply  of  the 
Taw  materials  required. 

Thus,  the  raw  material  required  in  the  produc- 


Trusts  and  Monopolies.  229 

tion  of  corn,  namely,  the  soil,  is  very  abundant,  and 
may  be  found  in  all  parts  of  the  country;  the 
process  of  production,  or  cultivation,  is  simple,  re- 
quiring but  little  skill  and  small  capital,  and  is 
pursued  by  a  very  great  number  of  individual 
proprietors.  The  attempt,  therefore,  to  secure  con- 
trol of  a  sufficient  percentage  of  the  source  of  pro- 
duction to  monopolize  this  commodity,  would  be 
attended  with  very  great  difficulties,  and  so  there 
is  no  monopoly  in  the  production  of  corn.  Bitu- 
minous coal  is  found  in  large  quantities,  under- 
lying large  tracts  of  land  in  numerous  districts, 
widely  scattered,  throughout  the  country.  It  would 
require  a  great  amount  of  capital  to  purchase  and 
hold  these  lands,  and  we  have  thus  far  had  no  mo- 
nopoly in  the  output  of  bituminous  coal. 

Anthracite  coal,  on  the  other  hand,  is  deposited 
in  comparatively  small  quantities,  in  relatively 
narrow  districts,  and  in  but  few  parts  of  the  United 
States.  It  has  been  quite  easy,  therefore,  for  a 
few  large  corporations  to  purchase  practically  all 
these  sources  of  supply,  and  we  have  a  most  power- 
ful and  oppressive  monopoly  in  that  product. 

Iron  ore  is  found  in  many  parts  of  the  country, 
and  while  it  is  not  difficult  to  take  the  ore  from 
the  earth,  yet  it  requires  large  amounts  of  capital 
to  convert  it  into  iron  and  steel,  and  we  find  a 
gigantic  monopoly  in  the  production  of  these 
metals. 

Whatever  serves  to  restrict  the  supply  of  any 
commodity,  makes  it  easier  to  secure  control  of  the 
market,  and  thereby  facilitates  the  creation  of  a 
monopoly.    A  duty  levied  upon  the  importation  of 


230  Combinations, 

a  given  class  of  foreigii'inade  articles,  for  the  pur- 
pose of  encouraging  the  manufacture  of  them  in 
this  country,  must  necessarily  raise  the  price  of 
these  goods  to  the  American  consumer,  and  will 
therefore  tend  to  restrict  their  importation. 

The  purpose  of  the  imposition  of  protective  du- 
ties is  to  enable  the  home  producer  to  raise  the  price 
of  his  product  to  a  point  just  a  little  below  that  of 
the  foreign-made  article,  plus  the  amount  of  duty 
imposed.  So  long,  therefore,  as  the  home  pro- 
ducers are  content  to  keep  their  prices  a  little  be- 
low the  point  at  which  foreign-made  articles  of  the 
same  kind  can  be  sold  after  paying  the  duties  im- 
posed, the  tariff  laws  serve  as  a  wall  encircling  our 
country,  and  excluding  all  products  of  foreign  na- 
tions, which  fall  within  the  enumerated  lists  of 
articles  to  which  protection  is  afforded. 

The  exclusion  of  this  volume  of  foreign-made 
goods,  manifestly  greatly  reduces  the  extent  of  what 
we  term  our  home  market,  and  renders  it  much 
more  susceptible  to  manipulation  by  those  who  are 
seeking  to  secure  a  monopoly. 

A  moment's  reflection  will  suggest  to  any  one 
many  of  the  difficulties  which  must  necessarily  at- 
tend any  attempt  to  monopolize  the  world's  pro- 
duction of  any  given  article.  Kace  distinctions  and 
prejudices,  variety  of  language,  international  politi- 
cal relations,  difference  of  taste,  customs,  and  man- 
ner of  doing  business,  diversity  of  class,  the  diffi- 
culties of  enforcing  agreements  between  the  parties 
to  a  combination,  and  the  vast  amount  of  capital 
that  would  be  required, — all  combine  to  discourage 
any  attempt  to  form  a  monopoly.    Whereas,  with 


Trusts  and  Monopolies.  231 

the  market  restricted  to  the  confines  of  a  single 
nation,  many  of  these  difficulties  would  disappear 
entirely,  and  others  would  assume  much  less  for- 
midable proportions.  It  is  just  as  though  we  were 
to  attempt  to  dip  out  or  control  the  waters  of  Lake 
Michigan ;  we  would  have  before  us  an  intermina- 
ble task.  But  if  we  construct  a  wall  around  a  small 
portion  of  it,  just  as  is  commonly  done  in  the  con- 
struction of  dry  docks  in  which  vessels  are  to  be 
repaired,  we  can  then  pump  out  the  water,  or  con- 
trol the  volume  within  the  inclosure  at  pleasure, 
and  with  but  little  difficulty. 

Or,  to  be  more  specific,  let  us  take  a  practical 
example.  Suppose  we  wish  to  monopolize  the 
world's  output  of  penknives ;  we  shall  have  to  take 
into  consideration  the  productive  capacity  of  all 
the  civilized  nations,  the  different  languages,  cus- 
toms and  laws  which  are  peculiar  to  each,  the  diffi- 
culty of  inducing  the  manufacturers  of  one  nation 
to  confide  in,  and  to  combine  with  those  of  another, 
and  the  great  amount  of  capital  that  would  be 
required  to  unite  the  widely  scattered  plants,  and 
we  will  soon  be  forced  to  realize  that  a  task  full 
of  extraordinary  difficulties  awaits  us.  But,  if  one 
nation  will  levy  an  import  duty  upon  penknives  of, 
say,  forty  cents  each  on  those  valued  at  fifty  cents, 
which  is  the  duty  imposed  by  the  present  tariff  laws 
of  the  United  States,  a  knife  which  before  sold 
for  fifty  cents  in  the  open  market  could  not  now 
be  sold  within  that  nation  for  less  than  fifty  cents 
plus  the  duty  paid,  which  in  the  case  assumed  is 
forty  cents,  making  the  selling  price  of  the  foreign- 
made  knife  ninety  cents.    The  levying  of  the  im- 


232  Combinations, 

port  duty,  or  tariff,  as  it  is  termed,  does  not, 
however,  necessarily  increase  the  cost  of  produc- 
tion of  the  domestic  article,  and  the  manufacturers 
may  continue  to  sell  them  at  fifty  cents  each,  or 
raise  the  price  to  eighty  or  eighty-five  cents;  but 
so  long  as  they  keep  the  price  below  ninety  cents, 
it  is  clear  that  the  foreign-made  knives  cannot  be 
sold  in  competition  with  them.  There  are  cases, 
however,  in  which  peculiar  excellence,  familiar 
"usage,  or  other  distinction  has  established  a  repu- 
tation for  some  particular  make,  for  which  people 
may  be  willing  to  pay  a  premium  in  excess  of  the 
price  charged  for  other  knives  of  the  same  clasr^, 
but  this  set  of  cases  forms  an  exception  to  the 
operation  of  the  laws  of  trade,  and  should  be 
carefully  excluded  from  every  discussion  of  the 
natural  and  probable  results  of  any  proposed  sys- 
tem of  protection. 

With  the  foreign-made  knives  thus  excluded 
from  our  market,  we  have  only  the  home  manu- 
facturers to  deal  with.  These  are  all  men  of  the 
same  nationality,  who  speak  one  language,  are  sub- 
ject to  similar  laws,  customs  and  conditions,  have 
a  like  class  of  employees  to  deal  with,  and  sub- 
stantially equal  rates  of  wages  to  pay,  and  it  is 
merely  necessary  to  stimulate  the  growth  of  a  few 
of  the  larger  concerns,  and  to  squeeze  out  a  num- 
ber of  the  smaller  ones,  in  order  to  get  the  entire 
business  into  the  hands  of  a  few  large  manufac- 
turers, when  it  will  be  comparatively  easy  for  them 
to  get  together,  and  to  make  the  necessary  agree- 
ments and  arrangements  for  consolidation  into  one 
great  monopoly. 


Trusts  and  Monopolies.  233 

It  is  clear,  therefore,  that  the  imposition  of  a 
tariff  for  protection  tends  to  create  conditions 
which  are  favorable  to  the  formation  of  combina- 
tions among  manufacturers,  and  to  the  exercise  of 
monopolistic  powers. 

Let  us  now  inquire  whether  monopolistic  com- 
binations have  actually  been  formed  in  the  produc* 
tion  of  those  articles  upon  which  a  protective  tariff 
has  been  laid,  for  the  purpose  of  encouraging  their 
production  in  this  country. 

Those  readers  who  will  take  the  trouble  to  ex- 
amine the  schedules  of  the  tariff  law  of  1897,  com- 
monly known  as  the  Dingley  law,  may  learn  upon 
just  what  articles  import  duties  are  levied  by  the 
United  States,  and  the  exact  amount  of  these  duties. 
Any  attempt  to  enumerate  these  articles,  even  in 
general  classes,  w^ould  require  much  more  space 
than  this  work  can  afford,  and  we  must  rely  upon 
the  reader^s  knowledge  of  the  general  character  of 
these  articles  to  guide  him  in  pursuing  the  investi- 
gation attempted  in  this  chapter.  Some  notion  of 
their  character  and  variety  may,  however,  be  de- 
rived from  the  general  statement  that,  in  the  Ding- 
ley  law,  tariff  duties  varying  in  amount  from  ten 
per  cent,  on  diamonds  to  several  hundred  per  cent, 
on  proof  spirits,  are  levied  upon  nearly  every  article 
that  is  manufactured  or  produced  in  this  country, 
and  especially  those  in  which  labor  forms  a  large 
element  of  the  cost. 

It  would  be  almost  impossible  to  arrive  at  any 
accurate  statement  of  what  the  average  of  all  the 
duties  imposed  by  the  Dingley  law  really  is,  owing 
to  the  method  adopted  of  levying  both  specific  and 


234  Combinations, 

ad  valorem  duties,  and  to  the  great  number  and 
variety  of  articles,  and  grades  of  articles  enumer- 
ated, but  the  amount  of  these  duties  actually  paid 
into  the  treasury  of  the  Unitejd  States  on  goods 
imported  into  this  country,  as  shown  by  the 
Monthly  Summary  of  Commerce  and  Finance  of  the 
United  States  for  June,  1902,  prepared  in  the  Bu- 
reau of  Statistics  of  the  Treasury  Department  of 
the  United  States,  has  during  the  last  five  years 
ranged  from  forty-nine  and  twenty  hundredths  per 
cent,  to  fifty-two  and  thirty-eight  hundredths  per 
cent,  of  the  value  of  the  articles  upon  which  it  was 
paid,  being  in  1901  forty-nine  and  eighty-three 
hundredths  per  cent.  So  it  seems  entirely  fair  to 
say  that  the  average  amount  of  duty  paid  upon 
articles  imported  into  this  country  is  fifty  per 
cent.,  and  that  will  be  assumed  to  be  the  true  rate 
for  the  purpose  of  this  chapter. 

In  volume  seven  of  the  Twelfth  Census  of  the 
United  States,  for  1900,  Manufactures,  Part  One, 
page  86,  there  is  given  a  table  showing  one  hun- 
dred and  eighty-five  bona  fide,  legally  chartered 
combinations  that  were  engaged  in  the  business  of 
manufacturing  in  the  United  States  during  the 
year  1900,  and  the  table  is  here  reproduced  in  full, 
excepting  the  portions  which  relate  to  capitaliza- 
tion with  which  we  are  not  now  concerned,  in  order 
that  the  reader  may  examine  for  himself,  and  take 
such  other  and  further  means  as  he  may  choose  to 
ascertain  how  many  of  them  are  engaged  in  the 
manufacture  of  tariff  protected  articles.  Many 
more  combinations  have  been  organized  since  the 
date  of  the  census  table,  such  as  the  United  States 


Trusts  and  Monopolies.  235 

Steel  Corporation  and  others  which  might  properly 
be  added  to  this  table,  but  it  is  preferred  to  give  the 
table  just  as  prepared  by  the  Director  of  the  Cei^sus, 
for  it  is  sufficiently  comprehensive  for  our  present 
purpose,  and  the  fact  that  it  was  not  prepared 
especially  to  bring  out  the  points  which  we  have 
now  in  mind,  will  serve  to  make  it  more  convinc- 
ing to  the  average  reader. 


236  Combinations, 

CAPITALIZATION  OF  IXDUSTRIAI* 
Name  of  Combination.  Location    of   General   Oflace. 


Alabama     Consolidated      Coal  Equitable  Bldg.,  Baltimore, 
and  Iron  Co.  Maryland. 

American  Axe  and  Tool  Co.      2.'53  Broadway,  New  York  city. 

American  Bridge  Co.  100  Broadway,  New  York  city. 

American  Iron  and  Steel  Mfg.  Lebanon,  Pa. 
Co., 

American  Ordnance  Co.  718  Crescent  Ave.,  Bridgeport, 

Conn. 

American  Radiator  Co.  Lake  and  Dearborn  Sts.,  Chi- 

cago, 111. 

American  Sheet  Steel  Co.  Battery  I'ark  Bldg.,  New  York 

city. 

American  Steel  and  Wire  Com- Rookery  Bldg.,  Chicago,  111. 
panv  of  New  Jersey. 

American  Steel   Casting  Co.      Chester,  Pa. 

American  Steel  Hoop  Co.  Carnegie  Bldg.,  Pittsburg,  Pa. 

American  Tin  Plate  Co.  24  State  St..  New  York  city. 

American   Wood  Working  Ma- 136  Liberty  St.,  New  York  city, 
chine  Co. 

Atlas  Tack  Co.  Taunton,  Mass. 

Central  Foundry  Co.  116  Nassau  St..  New  York  city. 

Continental  Gin  Co.  Blrmiugban],  Ala. 

Empire  Steel  and  Iron  Co.        Empire  Bldg.,  New  York  city- 
Federal  Steel  Co.  Empire  Bldg..  New  York  city. 

Ilerrlng-Hall-Marvln    Co.  400  Broadway,  New  York  city. 

International  Heater  Co. 

International  Power  Co.  253  Broadway,  New  York  city. 

International  Steam  Pump  Co.  26  Broadway,  New  York  city. 

National    Enameling    and  81-83    Fulton    St.,    New    York 

Stamping  Co.  city. 

Katlonal  Malleable  Cleveland,  Ohio.- 

Castings  Co. 

Katlonal  Saw  Co.  Newark,  N.  J. 

National  Shear  Co.  Fremont,   Ohio. 

National  Steel  Co.  Carnegie  Bldg..  Pittsburg,  Pa. 

National  Tube  Co.  Havemeyer    Bldg.,    New    York 

city. 

Niles-Bement-Pond  Co.  136  Liberty  St.,  New  York  city. 

Ohio  Tool  Co.,  of  Auburn,  N.Y.Columbus.   Ohio. 

Otis  Elevator  Co.  71   Broadway.   New  York  city. 

I'lttsburg  Stove  &  Range  Co.     610-612    Wood    St.,    Pittsburg, 

Pa. 

Republic  Iron  &  Steel  Co.  Stock     Exchange    Bldg.,     Chi- 

cago, 111. 

Fhelby  Steel  Tube  Co.  American    Trust   Bldg.,  Cleve- 

land, O. 


Trusts  and  Monopolies.  237 


COMBINATIONS  AND  DIVIDENDS  PAID. 


=11 

Date  of  Or-        &»§* 
ganization.        '  ^^^ 

CPPS  |J 

P2.M 

Dividends  Paid  during 
Census. 

Rate  on  Pre-  Rate  on  Com- 
ferred  Stock.        mon  Stock. 

July  10,  1899... 

4 

$5,000,000 

7  percent. 

None. 

Dec.    1,    1889.. 
April  14,  1900.. 
Aug.  21,  1899.. 

6 

24 

5 

2,000,000 
70,000,000 
20,000,000 

None. 

None. 

5  per  cent. 

None. 

20  per  cent. 

None. 

Dec.  31,  1895.. 

2 

2,500,000 

None. 

None. 

Feb.  10,  1899.. 

9 

10,000,000 

7  per  cent. 

None. 

March  28,  1900. 

29 

53,000,000 

None. 

None. 

Jan.  13,  1899.. 

42 

90,000,000 

7  per  cent. 

5  per  cent. 

Feb.  23,   1894.. 
April  14,  1899.. 
Dec.   15,   1898.  . 
Nov.  20,  1897. 

6 
15 
65 

8 

4,200,000 
33,000,000 
50,000,000 

4,000,000 

7  per  cent. 

7  per  cent. 

7  per  cent. 

None. 

6  per  cent. 
None. 
None. 
None. 

June  1,  1891... 
July  15,  1899.. 
Nov.  27,  1899.  . 
March  14,  1899. 
Sept.   9,    1898.. 

June,    1892 

July    1,    1898.. 
Jan.   14,   1899.. 
March  24,  1899. 
Jan.  29,  1899.. 

4 

14 

6 

10 

17  : 

2 
2 
2 
6 
10 

700,000 

14,000,000 

3,000,000 

5,000,000 

200,000,000 

3,300,000 

1,800,000 

8,000,000 

27,500,000 

30,000,000 

None. 

6  per  cent. 

6  per  cent. 

None. 

6  per  cent. 

6  per  cent. 

7  per  cent. 

None. 
None. 
None. 
None. 

3%2percent. 
None. 

None. 
None. 
None. 

Jan.  30,  1891.. 

4 

3,000,000 

None. 

May  23,  1890.. 
May  23,  1898.. 
Feb.  25,  1899.. 
June   16,    1899. 

4 
3 

22 
26 

1,000,000 

3,000,000 

59,000,000 

80,000,000 

4  per  cent. 

7  per  cent. 
7  percent. 

None. 

None. 
None. 

Aug.  11,  1899 .  . 
Sept.  12,  1893.. 
Nov.  28,  1898.. 
Sept.   1,   1899.. 

4 
2 
6 

8 

8,000,000 

350,000 

11,000,000 

2,000,000 

6  per  cent. 

6  per  cent. 

7  percent. 

None. 
None. 
None. 
None. 

May  3,  1899... 

35 

55,000,000 

7  per  cent. 

None. 

Feb.    9,    1900.. 

14 

15,000,000  3ya  percent. 

None. 

238 


Combinations, 

CAPITALIZATION  OF  INDUSTRIAL 


Name  of  Combination. 


Location   of  General   Office. 


Standard  Chain  Co.  First     National     Bank     BIdg.» 

Pittsburg.  Pa. 
Steel  Tired  Wheel  Co.  New  York  city. 

Susquehanna  Iron  &  Steel  Co.  Columbia,  Pa. 
United  Shoe  Machinery  Co.       205  Lincoln  St.,  Boston,  Masc 
United  States  Cast  Iron  80  Broadway,  New  York  city. 

Pipe  &  Foundry  Co. 
Virginia  Iron,   Coal  and   Coke  Bristol,   Va. — Tenn. 

Co. 
Wheeling  Steel  &  Iron  Co.  Wheeling,  West  Va. 

American  Beet  Sugar  Co.  32  Nassau  St.,  New  York  city. 


American  Caramel  Co. 

American  Cereal  Co. 

American  Chicle  Co. 

American   Pastry  &  Manufac 

turing  Co. 
American  Preserve  Co. 

American  Sugar  Refining  Co. 
California  Fruit  Canners' 

Ass'n. 
Columbia  River  Packers' 

Ass'n. 
Continental  Biscuit  Co. 
Continental  Creamery  Co. 
Glucose  Sugar  Refining  Co. 

National  Biscuit  Co. 
National  Rice  Milling  Co. 

National   Sugar  Refining  Co. 
Pacific  Const  Biscuit  Co. 
Flllsbury-Washburn  Flour 

Mills  Co.,  Ltd. 
Boyal  Baking  Powder  Co. 

Seacoast  Packing  Co. 
Sperry  Flour  Co. 

Standard  Sardine  Co. 
United    States    Flour    Milling 
Co. 


20  E.  Allen   St..  Philadelphia, 
Pa. 

1340    Monadnock    Bldg.,    Chi- 
cago. 111. 

Park    Row    Bldg.,    New    York 
city. 

Broadway.  Thirty-sixth   St., 
and  Sixth  Ave.,  N.  Y.  city» 

950    Beach    St.,    Philadelphia, 
Pa. 

117  Wall   St..   New   York  city. 

203  California  St.,  San  Fran- 
cisco, Cal. 

Astoria,  Ore. 

Chicago,  III. 

523  Jackson  St.,  Topeka,  Kan. 

845  Rookery  Bldg.,  Chicago, 

205  La  Salle  St.,  Chicago,  111. 

542    Montegut    St.,    New    Or- 
leans. La. 

109   Wall  St.,  New  York  city. 

Seattle.  Wash. 

301    Guaranty    Bldg.,    Minne- 
apolis,  Minn. 

100   William    St.,   New  York 
city. 

Royal  Ins.  Bldg.,  Chicago,  111. 

134  California  St.,  San  Fran- 
cisco, Cal. 

Eastport,  Me. 

207  Produce  Exchange,  New 
York  city. 


Trusts  and  Monopolies.  239 


COMBINATIONS  AND  DIVIDENDS  PAID. 


Number     of 
Plants  Con- 
trolled. 

Oo 

Si 

Otrp 
P  Hm 

m 

Dividends  Paid  during 
Census. 

Rate  on  Pre-  Rate  on  Com- 
ferred  Stock.       mon  Stock. 

Feb.    2,    1900.. 

11 

$3,000,000 

None. 

None. 

Jan.  26,  1897.  . 

June,    1899 

Feb.   8,   1899... 
March  13,  1899. 

5 

7 

5 

17 

4,000,000 

1,500,000 

25,000,000 

30,000,000 

3  per  cent. 

6  per  cent. 
SVi  per  cent. 

3   per   cent. 
18   per  cent. 
8    per   cent. 
None. 

Jan.  2,  1899... 

21 

10,000,000 

None. 

April  16,  1892.. 
March  24,  1899. 

7 
4 

5,000,000 
20,000,000 

8  per  cent. 
6  percent. 

None. 

March  28,  1898. 

2 

2,000,000 

8  percent. 

None. 

June,    1891 

6 

3,400,000 

8  per  cent. 

June  30,  1899.. 

6 

9,000,000 

6  per  cent. 

81^  per  cent. 

July    7,    1899.. 

6 

3,000,000 

None. 

None. 

Dec.  21,  1807.. 

1 

125,000 

6  per  cent. 

Jan.   10,  1891.. 
July  30,  1899.. 

Feb.,    1899 

5 

20 

4 

10,000,000 
3,500,000 

2,000,000 

7  per  cent. 

9   per  cent. 
60    cts.    per 
share  monthly. 
21^    per   cent. 

June  15,  1898. . 
March  1,  1900.. 
Aug.    3,    1897.. 

5 

13 

5 

500,000 

500,000 

40,000,000 

None. 
7  per  cent. 

7  per  cent. 
6    per  cent. 

Feb.    3,    1898.. 
May,    1892 

95 
5 

55,000,000 
5,000,000 

7  percent. 
None. 

4  per  cent. 
None. 

June   2,    1900.. 
Sept.  15,  1899.. 
Oct.  18,  1899.. 

3 

12 
5 

20,000,000 
4,000,000 
4,850,000 

None. 

None. 

8  per  cent. 

None. 
None. 
4  per  cent. 

March    1,    1899 

3 

20,000,000 

6  per  cent. 

None. 

April   5,   1899.. 
Sept.,  1892 

8« 
11 

8,000,000 
10,000,000 

None. 

None. 

114    per  cent. 

March  16,  1899. 
April  27,  1899.. 

25 
16 

5,000,000 
25,000,000 

None. 
None. 

None. 
None. 

240  Combinations, 

ClPITALIZATION  OF  INDUSTRIAL 
Name  of  Combination.  Location   of  General   Offlce. 


American  Agricultural  Chemi-26  Broadway,  New  York  city, 
cal  Co. 

American  Cotton  Oil  Co.  27  Beaver  St..  New  York  city. 

American  Linseed  Co.  100  William  St.,  New  York 

city. 

Barrett  Manufacturing  Co.,       1205    Land   Title   Bldg.,   Phll- 
The.  adelphia,  Pa. 

California  Powder  Works.  330    Market    St.,    San    Fran- 

cisco, Cal. 

The  Celluloid  Co.  30-36     Washington     PI.,    New 

York  city. 

Continental  Cotton  Oil  Co.         4.'>  Cedar  St.,  New  York  city. 

The  Fisheries  Co.  135  Front  St.,  New  York  city. 

CJeneral  Chemical  Co.  25  Broad   St.,  New  York  city. 

<irasselli  Chemical  Co.  784  The  Arcade.  Cleveland.  O. 

National  Salt  Co.  26  Broadway,   New  York  city. 

National    Starch    Manufactur-1  Broadway,  New  York  city, 
ing  Co. 

Standard  Oil  Co.  26  Broadway,  New  York  city. 

United  Starch  Co.  24    State  St..   New   York  cltV. 

Virginia-Carolina  Chemical        Crenshaw     Warehouse,     Rich- 
Co.  mond.  Va. 

Amalgamated  Copper  Co.  52  Broadway.  New  York  city. 

American  Brass  Co.  Waterbury,  Conn. 

American  Shot  &  Lead  Co.        902  Security  Bldg.,  St.  Louis, 

Mo. 

American  Smelting  &  Refining  71  Broadway,  New  York  city. 
Co. 

American  Type  Foundries  Co.  25    WMlliam    St.,   N«w   York 

city. 

Cherokee-Lanyon  Spelter  Co.     Laclede  Bldg.,  St.  Louis,  Mo. 

International  Silver  Co.  Merlden,  Conn. 

Magnus   Metal  Co.  830  Elllcott  Sq.,  Buffalo,  N.  Y. 

National  Lead   Co.  100    William    St.,    New    York 

city. 

New  Jersey  Zinc  Co.  71  Broadway,  New  York  city. 

Standard     Sanitary    Manufac- 531-533    Wood    St.,    Pittsburg, 
turing  Co.  Pa. 

American  Distributing  Co.         27    William    St.,    New    York 

city. 

American  Malting  Co.  63d    St.    &    East    River,    New- 

York  city. 

American  Spirits  Manufactur-  27    William    St.,     New     York 
Ing  Co.  city. 

California  Wine  Association.     661-671  3d  St.,  San  Francisco^ 

Cal. 


Trusts  and  Monopolies.  241 


COMBINATIONS  AND  DIVIDENDS  PAID. 


Date  of  Or- 
ganization. 

Ill 

"1^ 

Dividends   Paid  during 
Census. 

Rate  on  Pre- Rate  on  Com- 
ferred  Stock.       mon  Stock. 

April,   1899... 

.    27  $40,000,000 

6  per  cent. 

None. 

Oct.   14,   1899. 
Dec.    5,    1898. 

.    57 
.    47 

34,799,400 
33,500,000 

6  per  cent. 

7  percent. 

4   per   cent. 
None. 

Jan.    1,    1896. 

.    12 

5,000,000 

10  per  cent. 

Dec.  28,  1861. 

.      2 

1,500,000 

12  per  cent. 

Nov.  28,  1890. 

.      1 

6,000,000 

6%   per  cent. 

April  2,  1890...     7 
M&y  25,    1900.  .      5 
Feb.   14,  18.>9..    17 
June  10,  1885..      7 
March   18,   1899  31 
April   12,   1890.    22 

6,000,000 

3,000,000 

25,000,000 

7,500,000 

12,000,000 

10,500,000 

7  per  cent. 
None. 

6  per  cent. 

7  per  cent. 
4  per  cent. 

6  per  cent. 
None. 

4  per  cent. 

7  per  cent. 
None. 
None. 

Aug.  1,  1882.. 
Aug.  31,  189.>. 
Sept.  12,  1895. 

.    26 
.      3 
.    33 

110,000,000 

6,000,000 

50,000,000 

6  per  cent. 
3  per  cent. 
8  per  cent. 

45  per  cent. 
None. 
4  per  cent. 

April    27,    189£ 
March   1,   1899 
Aug.  27,  1890. 

K     4 
...  4 
.    12 

75,000,000 

20,000,000 

3,000,000 

8  per  cent. 
5  per  cent. 
None. 

April  4,   1899. 

.    13 

65,000,000 

7  per  cent. 

None. 

Feb.  8,  1892.. 

12 

4,000,000 

4   per  cent. 

Jan.   1,  1896.. 
Nov.  19,  1898. 
June,     1899... 
Dec.  7,  1891.. 

.    14 
.  13 
.      5 
.   17 

600,000 

20,000,000 

3,000,000 

30,000,000 

1  %  per  cent. 
8  percent. 
7  per  cent. 

None. 
None. 

10  per  cent. 
1     per  cent. 

June  30,  1880. 
Jan.    1,    1900. 

.     8 
.      6 

10,000,000 
5,000,000 

None. 

6  per  cent. 
None. 

Aug.  10,  1891. 

.      2 

5,000,000 

None. 

Sept.»    1897... 

.   26 

30,000,000 

3%  per  cent. 

None. 

Aug.  22,  1895. 

.    13 

35,000,000 

None. 

None. 

Aug.  10,  1894. 

.      9 

10,000,000 

6  per  cent. 

242 


Combinations, 

CAPITALIZATION  OF  INDUSTRIAL 


Name  of  Combination. 


Location   of  General   Office. 


Chicago  Breweries,  Ltd. 
Chicago  Consolidated  Brewing 

&  Malting  Co. 
Cleveland  &  Sandusky  Brewing 

Co. 
Connecticut  Breweries  Co., 

Ltd. 
Consumers'  Brewing  Co. 
Erie  Brewing  Co. 
Evansville   Brewing  Ass'n. 

Indianapolis  Brewing  Co. 

Kentucky  Distilleries  and 

Warehouse  Co. 
Maryland  Brewing  Co. 

New  Orleans  Brewing  Co. 
New  York  &  Kentucky  Co. 
Paterson    Brewing   &    Malting 

Co. 
Pennsylvania  Central  Brewing 

Co. 
Pittsburg  Brewing  Co. 
St.  Louis  Brewing  Ass'n. 

San  Francisco  Breweries,  Ltd. 

Seattle  Brewing  &  Malting  Co. 
Springfield   Breweries,  Ltd. 
Springfield  Breweries  Co. 
Standard    Distilling    and    Dis- 
tributing Co. 
United  Breweries  Co. 

United   States  Brewing  Co., 

Ltd. 
United  States  Brewing  Co. 
American  Bicycle  Co. 

American  Car  &  Foundry  Co. 

I'ressed  Steel  Car  Co. 

I'-iTman  Co..  The. 
Fianrtard  Wheel  Co. 
Sv/uthern  Car  &  Foundry  Co. 


Chicago,   111. 

1422    Monadnock    Bldg.,    Chi- 
cago, III. 
Cleveland,  Ohio. 

Bridgeport,  Conn. 

Philadelphia,  Pa. 

Erie,   Pa. 

5th  &  Ingle  Sts.,  Evansville, 
Ind. 

820  High  St.,  Indianapolis* 
Ind. 

27  William  St..  New  York 
city. 

Brewers'  Exchange  Bldg.,  Bal- 
timore,  Md. 

New  Orleans,  La. 

67  Lake  Ave.,  Rochester,  N.  Y. 

Paterson,  N.  J. 

431  N.  Seventh  St,  Scranton, 
Pa. 

Pittsburg.  Pa. 

Walnwrlght  Bldg.,  St.  Louis, 
Mo. 

240  Second  St.,  San  Fran- 
cisco, Cal. 

Seattle.  Wash. 

Springfield.  Ohio. 

Springfield,  Mass. 

27  William  St.,  New  York 
city. 

Stock  Exchange  Bldg.,  Chi- 
cago. 111. 

788  liroad  St.,  Newark,  N.  J. 

Monadnock  Bldg.,  Chicago,  111. 
Park    Row    Bldg.,    New    York 

city. 
Lincoln  Trust  Bldg.,  St.  Louis, 

Mo. 
Tradesmen's   Bldg.,    Pittsburg, 

Pa. 
309  W.  Third  St.,  Chicago,  111. 
Terre  Haute,  Ind. 
Birmingham,  Ala. 


Trusts  and  Monopolies, 


243 


COMBINATIONS  AND  DIVIDENDS  PAID. 


O  pC 


ganization. 


April,    1889 2 

June,   1890 4 

June   7,  1898...  9 

1890    3 

Oct.   26,   1896..  4 

March  20,  1899.  2 

March,     1894. . .  3 


$3,000,000 
5,000,000 

6,000,000 

700,000 

3,800,000 

1,G00,000 

400,000 


Dividends  Paid  during 
Census. 


Rate  on  Pre- Rate  on  Com- 
ferred  Stocl£.        mon  Steels. 

%   per  cent, 
6  per  cent.     None. 
8  per  cent. 


None. 

None. 

7  percent.     None. 

None. 


Feb.   3,  1899 ...  50  32,000,000 

Dec.  23,  1898..  16  6,500,000 

Oct.  6,   1899...  4  2,790,000 

Jan.  25,  1900..  3  2,000,000 

July  1,  1899...  6  3,000,000 

Aug.  23,  1897..  12  5, 

Feb.  4,  1899...  18  13,000,000 

June  1,  1889...  11  5,250,000 

April    30,1899..  6  1,023,300 

1893    3  1,000,000 

June   1,    18 -O..  11  509,250 

April   19,   1899..  3  1,375,000 

June  27,   1898..  10  24,000,000 

Aug.  8,   1898...  12  5,600,000 

1889    5  3,500,000 

Sept.   1,   1890..  6  6,000,000 

May  12,  1889..  35  30,000,000 

Feb.  20,  1889 .  .  17  60,000,000 

Jan.  12,  1899 .  .  4  25,000,000 

Dec,   1899 5  74,000,000 

Aug.  20,  1892..  6  1,000,000 

June    1,    1899..  5  3,000,000 


None.         None. 

6  per  cent.     None. 

None.  None. 

7  per  cent.     None. 

None. 


600,000  None 


None. 

7  per  cent.    4   per  cent. 

$2.70  per  share. 

None.         None. 

6   per   cent. 

8  per  cent.    6  per  cent. 
8  per  cent.     None. 

None.         None. 

None. 

8  per  cent.    5  per  cent. 

70  cts.  per  share. 
None.  None. 

7  percent.     None. 

7  percent.     6    per  cent. 

8  per  cent.* 
6  per  cent.     None. 
None.  None. 


244 


Combinations, 

CAPITALIZATION  OF  INDUSTRIAL 


Name  of  Combination. 


Location   of  General   Office. 


Ill  Fifth  Ave.,  New  York  city. 
Ill  Fifth  Ave.,  New  Yoric  city. 
Ill  Fifth  Ave.,  New  York  city. 
1322    Avenue    A,    New    York 

city. 
110-112    E.    Thirteenth    St., 

New  York  city. 
35  Wall  St.,  New  York  city. 
260  Broadway,  New  York  city. 
Ames  lildg.,  Itoston,  Mass. 


American  Snuff  Co. 
American  Tobacco  Co. 
Continental  Tobacco  Co. 
Havana-American    Co.,   The 

American  Felt  Co. 

American  Grass  Twine  Co. 

American  Thread  Co. 

American   Woolen   Co. 

Mt.   Vernon-Woodberry  CottonEqultable  Bldg.  Baltimore,  Md. 

Duck  Co. 
New  England  Cotton  Yarn  Co.  37    N.    Water   St,    New    Bed- 
ford, Mass. 
17  State  St.,  New  York  city. 
320  Broadway,  New  York  city. 
92  Cliff  St.,  New  York  city. 
RIdcway,  Pa. 
Shoffield.  Pa. 
WilUamsport,   Pa. 
26  Ferry   St.,  New  York  city. 
Fourth  Ave.  &  Nineteenth  St., 

New  York  city. 
84    Van    Buren    St.,    Chicago, 

111. 
Springfield.  Mass. 
30  Broad  St..  New  York  city. 
121-127  Crosby  St.,  New  York 

city. 
1602    Fisher    Bldg.,    Chicago, 
111. 


Standard  Rope  &  Twine  Co. 
United  States  IMnishlng  Co. 
American  Hide  &  Leather  Co 
Elk  Tanning  Co. 
Penn  Tanning  Co. 
Union  Tanning  Co. 
United  States  Leather  Co. 
American    Lithographic   Co. 

American  Straw  Board  Co. 

American  Writing  Paper  Co. 
International   Paper   Co. 
National  Wall  Paper  Co. 

Union  Bag  &  Paper  Co. 


Springfield,  Mass. 
22   S.   Fifteenth.  St., 


United  States  Envelope  Co. 
American  Cement  Co. 

phia,   Pa 
American  Clay  ManufacturingAkron,  Ohio. 

Co. 
American  Window  Glass  Co. 
Baltimore  Brick  Co. 


Philadel- 


Illlnois  Brick  Co. 

International   Pulp  Co. 
Macbeth-Evans  Glass  Co. 

National  Fire  Proofing  Co. 
T^ational  Glass  Co. 


200   Ninth   St.,   Pittsburg,   Pa. 

1002  Atlantic  Trust  Bldg., 
Baltimore,   Md. 

Chamber  of  Com.  Bldg.,  Chi- 
cago.  111. 

41  Park  Row  Bldg.,  N.  Y.  city. 

Telephone      Bldg.,      Pittsburg, 

Carnegie  Bldg.,  Pittsburg,  Pa. 
Neeren   Bldg.,   Pittsburg,   Pa. 


Trusts  and  Monopolies. 


245 


COMBINATIONS  AND  DIVIDENDS  PAID. 


Date  of  Or- 
ganization. 


o 

go 


«<  Co 

erg  — 
2p,o 


March  12,  1900. 
Jan.  21,   18st0.  . 
Nov.  28,  1898. 
Nov.    9,    1899 .  . 


9  ?25,000.000 

13     70,000,000 

9  100,000,000 

8     10,000,000 


Dividends   Paid  during 
Census. 

Rate  on  Pre-Rate  on  Com- 
ferred  Stock.        mon  Stocks 

None.  None. 

8  per  cent.  6  per  cent. 

7  per  cent.  None. 

7  per  cent.  None. 


Feb.  9,  1899 ...     5       5,000,000       6  per  cent.     None. 


June  8,  1899.  .. 
March  10,  1898. 
March  29,  1899. 
Aug.  29,  1899 . . 


3  15,000,000 

10  12,000,000 

30  65,000,000 

7  9,500,000 


July  15,  1899...   9     11,500,000 


Nov.  1,  1895... 
July  1,  1899.. 
Aug.  29,  1899.  . 
April  17,  1893. 
Aoril  13,  1893. 
April  13,  1893.. 
Feb.  25,  1893.. 
Jan.  1,  1896... 


12,000,000 

3,000,000 

35,000,000 

12,500,000 

13,500,000 

10,000,000 

23  128,000,000 

1       4,000,000 


5 
3 

30 
23 
14 

18 


None. 

5  per  cent.    10  per  cent.^ 
7  per  cent.     None. 

IV2    per  cent. 

7  per  cent.     None. 

None. 

7  per  cent.     None. 

None.  None. 

$1.50  per  share. 

None. 
$1.50  per  share. 

6  per  cent.     None. 

None. 


May  29,  1889..   17       6,000,000 


July  25,  1899.. 
Jan.  31,  1898.. 
June,   1892 


25,000,000 
45,000,000 
30,000,000 


Feb.  27,  1899..    17     27,000,000 


June,   1808 

March  11,  1890. 


5,000,000 
500,000 


March  1,  1900..  28     10,000,000 


July  31,  1899. 
June  23,  1899. 


39 

28 


17,000,000 
2,100,000 


None. 

6  per  cent. 

7  per  cent. 
7  per  cent. 


7  per  cent. 
6  per  cent. 


3  per  cent. 

None. 
None. 
None. 

None. 

None. 

32%  percent. 

None. 

None. 
None. 


Feb.  13,  1900..   36       9,000,000  None.  None. 


March,    1893.. 
July  7,  1899... 

Dec.  20,  1899. 
Nov.  1,  1899.. 


1  5,000,000 

7  2,200,000 

5  2,000,000 

19  4,000,000 


4  per  cent. 
7  per  cent. 

7  per  cent. 
None. 


None. 

4   per  cent. 

None. 
None. 


246 


Combinations, 

CAPITALIZATION  OF  INDUSTRIAL 


Name  of  Combination. 


Location   of   Generai   Office. 


Carnegie  Bldg..  Pittsburg,  Pa. 


Pittsburg  Plate  Glass  Co. 

Suburban   Briclc  Co. 

Trenton  Potteries  Co.  30.»  N.  Clinton  Ave.,  Trenton, 

N.  J. 
United   States  Clay   Manufac- Fifth    &_  Liberty    Sts.,    Pltt»- 


WheelTng,  V.  Va. 
.»  N.  Cll 


turing  Co. 
United  Glass  Co. 

Western  Stone  Co. 


burg.  Pa. 

Ninth  &  Bingham  Sts.,  Pitta- 
burg,   Pa. 

Chamber  of  Com.  Bldg.,  Chi- 
cago, III. 

Ill  Fifth  Ave.,  New  York  city. 


American  School  Furniture 

Co. 

Brunswlek-Balke-Coliender  Co.  860  Broadway,  New  York  city. 
Diamoud  Match  Co.  504    Pullman    Bldg.,    Chicago, 

Hevwood  Bros.  &  Wakefield  Co.  Gardner,   Mass. 
National  Casket  Co.  Oneida,  New  York. 

National  Cooperage  and  Wood- Peoria,   111. 

ware  Co. 
United  States  Bobbin  &  Shut- 270    Butler    Exchange    Bldg., 


tie  Co, 
Yellow  Pine  Co. 
American  Glue  Co. 

American  Hard  Rubber  Co. 

American  Ice  Co. 


Providence,  R.  I. 
16  Beaver  St.,  New  York  city. 
419    Atlantic   Ave.,    Boston, 

Mass. 
9-13    Mercer    St.,    New    York 

city. 
131  E.  Twenty-third  St.,  New 


York  city. 
120   Viaduct,   Cleveland,  Ohio. 
278      Congress      St.,      Boston, 

Mass. 
15  Exchange  PI.,  Jersey  City, 

N,   J. 
100    William    St.,    New    York 

city. 
Thirteenth     and     Pine     Sts., 

Pittsburg.  Pa. 
Consolidated  Railway  ElectriclOO  Broadway,  New  York  city. 
Lighting  &  Equipment  Co. 


American   Shipbuilding  Co. 
American  Soda  Fountain  Co. 

Central  Fireworks  Co. 

Commonwealth  Roofing  Co. 

Consolidated  Ice  Co. 


Electric  Boat  Co. 
General  Arlsto  Co. 
National  Carbon  Co. 
Pittsburg  Coal  Co. 
Rubber  Goods  Manuf.  Co, 
United  States  Rubber  C<K 
United  States  Whip  Co. 


100  Broadway.  New  York  city. 

343  State  St.,  Rochester,  N.  Y. 

Lock  Drawer  L.,  Cleveland.  O. 

Pittsburg.  Pa. 

New  Brunswick,  N.  J. 

9  Murray  St.,  New  York  city. 

Westfield,  Masa 


Trusts  and  Monopolies.  247 


COMBINATIONS  AND  DIVIDENDS  PAID. 


2^? 

Q-OJ  c 

§0 


Date  of  Or- 
ganization. 


April  1,  1895.. 
Dec.  29,  1898.. 
May  27,  1892.. 

Dec.  26,  1899.. 

Feb.  12,  1891.. 

Sept.  16,  1889.. 

Marcli  13,  1899. 

Jan.  30,  1884.. 
Feb.   13,  1889.. 

March  16,  1897. 
July  1,  1890.. 
Oct.  21,   1899.. 

July  31,  1899.. 

Nov.  12,  1891 . . 
July  7,  1894... 

April    21,   1898. 

March  11,  1899. 


March  16,  1899.  11 
Feb.  4,  1891...      7 


0-0  - 
f»  12.02 
UN  rj- 

^  ro  O 

^^9r 


10  10,000,000 

5  200,000 

6  3,000,000 

2  240,000 

13  5,000,000 

1  2,250,000 
17  10,000,000 

2  1,500,000 
9  15,000,000 

4  6,000,000 

11  6,000,000 

6  500,000 

7  2,000,000 

3  2,500,000 

6  1,800,000 

3  2,500,000 

7  40,000,000 

30,000,000 
3,750,000 


Dividends  Paid  during 

Census. 


Rate  on  Pre-Rate  of  Com- 
mon Stocic. 


June  8,  1896. 
June  6,  1899. . 
April  1,  1899. 
Jan.  6,  1900. . 


Feb.   7,  1899 ...  3 

Aug.    4,    1899 . .  5 

Jan.   16,  1899..  5 

Sept.   1,   1899 . .  5 

March  26,  1899.  14 

March  30.  1892.  5 

Dec.  29,  1892..  4 


ferred  Stock 

12  per  cent. 

None. 

None. 

None. 

8  percent. 
None. 

7  percent. 

None. 

8  per  cent. 

6  per  cent. 

7  per  cent. 
3  per  cent. 


6  3,500,000  3%  percent. 
6  500,000    3%  percent. 

7  4,000,000       6  per  cent. 
3  16,000,000 


6  per  cent. 
6  per  cent. 
None. 

None. 

None. 

None. 

None. 

6  per  cent. 
10  per  cent. 

None. 

5    per    cent. 

None. 

None. 
None. 

7  per  cent. 

4  per  cent. 

None. 
None. 

None. 

None. 

4  per  cent. 

None. 


10,000,000 
5,000,000 
10,000,000 
64,000,000 
50,000,000 
50,000.000 
2,200,000 


None. 

None. 

7  per  cent. 

10  per  cent. 

7  per  cent. 

None. 

7  per  cent. 

None. 

7  percent. 

None. 

7  per  cent. 

3  per  cent. 

12  percent. 

None. 

248  Combinations, 

It  may  be  suggested  that  some  of  these  combina- 
tions are  protected  by  internal  revenue  pro- 
visions as  well  as  by  import  duties,  and  we  are  will- 
ing to  admit  this.  We  are  also  willing  to  admit 
that  other  circumstances  contribute  to  aid  in  the 
formation  and  protection  of  other  combinations,  and 
that  some  of  them  receive  no  tariff  protection  what- 
ever, for  we  wish  it  to  be  clearly  understood  that 
it  is  not  our  present  purpose  to  attempt  to  prove 
that  the  protective  tariff  has  been  the  cause,  or  even 
the  chief  among  many  circumstances  which  have 
aided  in  the  formation  of  monopolistic  combina- 
tions. The  purpose  of  the  present  point  of  our  in- 
quiry is  merely  to  determine  whether  manufactur- 
ers, who  have  been  afforded  protection  by  the  tariff, 
have  entered  into  combinations  the  presumptive 
purpose  of  which  is  to  exhort  larger  profits  from  the 
people. 

By  merely  looking  over  the  names  of  the  combi- 
nations shown  in  the  table,  it  will  be  seen  that 
these  are  sufficient  to  identify  them  with  the 
branches  of  industry  with  which  the  protective 
tariff  is  alwa3*s  associated  in  the  mind  of  every 
business  man;  and  upon  a  careful  comparison  of 
the  table  with  the  schedules  of  the  tariff  law, 
it  will  be  found  that  of  the  one  hundred 
and  eighty-five  combinations  shown,  one  hun- 
dred and  seventy-six  were  engaged  in  the 
manufacture  of  articles  which  are  protected 
by  the  tariff,  while  only  nine  were  en- 
gaged in  the  manufacture  of  articles  to  which  no 
tariff  protection  is  afforded.  A  more  convincing 
answer  to  the  query,  have  combinations  been  formed 
among  manufacturers  engaged  in  the  production 


Trusts  and  Monopolies.  249 

of  tariff  protected  articles,  can  hardly  be  devised, 
than  that  afforded  by  the  foregoing  table  prepared 
by  the  Census  Department. 

It  appearing,  therefore,  that  manufacturers 
whose  products  are  protected  by  tariff  duties,  have 
formed  combinations  for  the  purpose  of  controlling 
prices,  for  the  power  to  control  prices  is  the  natural 
result  of  these  combinations,  and  people  must  al- 
ways be  presumed  to  have  intended  to  do  that  which 
is  the  natural  and  probable  result  of  their  acts ;  let 
us  inquire  whether  they  have  misused  the  pro- 
tection afforded  them,  to  the  detriment  of  the  peo- 
ple at  large. 

The  purpose  of  the  government  in  levying  the 
protection  duties  was  to  increase  the  number  of 
factories  in  the  country,  the  number  of  persons  em- 
ployed, the  wages  of  the  employees,  and  to  encour- 
age home  manufacturers  until  such  time  as  they 
could  compete  with  the  manufacturers  of  foreign 
nations.  The  purpose  of  the  combinations,  on  the 
other  hand,  is  to  reduce  the  number  of  factories 
in  operation,  the  number  of  persons  employed,  the 
amount  of  wages  to  be  paid,  and  to  enter  into  com- 
petition with  the  manufacturers  of  Europe,  while 
still  retaining  the  protection  of  the  tariff. 

Thus  in  the  one  hundred  eighty-five  combina- 
tions shown  in  the  table,  there  were  two  thousand 
two  hundred  sixteen  plants  controlled,  of  which 
one  hundred  seventy-six  were  idle  during  the  year 
1900,  as  shown  by  the  same  volume  of  the  Census, 
page  83.  The  reduction  of  the  number  of  plants 
to  be  operated  is  one  of  the  chief  sources  of  the 
economies  effected  by  combinations,  for  it  carries 
with  it  the  reduction  of  the  number  of  employees. 


250  Combinations, 

/  The  number  of  wage  earners  employed  by  these 
one  hundred  eighty-five  combinations,  is  shown  by 
the  same  authority  to  have  been  only  eight  and  four- 
tenths  per  cent,  of  the  total  number  of  wage  earners 
employed  in  all  manufactories,  whereas  their  pro- 
duct was  fourteen  and  one-tenth  per  cent,  of  the  out- 
put of  all  establishments,  and  the  wages  paid  by 
these  combinations  was  only  nine  and  six-tentha 
per  cent,  of  the  total  wages  paid  "by  all  manufac- 
turers. * 

Thus  we  see  that  the  purposes  and  results  of 
these  large  trusts  and  combinations  are  directly 
opposite  to  those  which  were  sought  to  be  secured 
by  the  protective  tariff,  and  that  the  protection  en- 
joyed by  them  has  been  greatly  abused,  and  di- 
verted from  the  purposes  for  which  it  was  origin- 
ally granted. 

The  ability  of  the  manufacturers  of  the  United 
States  to  compete  with  those  of  any  other  nation 
has  been  testified  to  in  many  ways. 

The  frequent  appearance  in  newspapers  and  mag- 
azine articles,  of  allusions  to  the  inroads  which  the 
American  manufactures  are  making  into  the  mark- 
ets of  Europe,  is  an  evidence  that  the  exportation 
of  American-made  goods  has  become  sufficiently 
large  to  attract  the  serious  attention  of  writers  at 
home  and  abroad. 

The  often  repeated  statement  that  many  of  the 
largest  manufacturing  establishments  of  Europe 
send  representatives  to  visit  and  study  the  indus- 
trial institutions  of  this  country,  gives  assurance 
that  the  attention  of  the  foreign  producers  has  been 
attracted,  and  that  they  see  in  our  factories,  com- 
petitors whose  ways  must  be  studied  with  care  if 


Trusts  and  Monopolies.  25  li 

they  do  not  wish  to  be  outdone  by  them.  This  so- 
licitude on  the  part  of  foreigners  must  be  solely 
due  to  apprehensions  of  the  competition  of  our 
manufacturers  abroad,  for  the  amount  of  our  tariff 
duties  would  preclude  the  possibility  of  their  ever 
thinking  of  driving  competition  into  our  home 
market. 

The  well  known  fact  that  many  of  the  largest 
manufacturing  institutions  of  Europe  have  been  re- 
modeled and  equipped  with  American  machinery 
and  appliances,  at  a  cost  of  vast  sums  of  money, 
bears  most  substantial  testimony  to  the  conviction 
in  the  minds  of  the  foreign  producers  that  they 
must  either  prepare  to  meet  our  manufacturers  with 
their  own  machinery  or  submit  to  be  outsold  by 
them. 

The  common  experience  of  travelers  in  Europe, 
in  finding  American-made  articles  for  sale  in  every 
large  city,  and  in  use  among  the  people,  shows  how 
general  the  exportation  of  the  products  of  our  fac- 
tories has  become ;  and  the  report  of  the  Secretary 
of  the  Treasury  of  the  United  States,  which  shows 
that  the  exports  of  American  manufactures  for  the 
years  1900,  1901  and  1902  have  exceeded  four  hun- 
dred million  dollars  per  annum,  affords  indisputa- 
;ble  evidence  of  the  magnitude  to  which  the  exporta- 
tion of  American-made  articles  has  attained. 

The  magnitude  of  these  figures  must  convince 
the  reader  that  the  export  trade  of  the  American 
manufacturers  has  passed  far  beyond  the  experi- 
mental stage,  and,  by  comparing  these  figures  with 
the  exports  of  Great  Britain,  Germany  and  France, 
it  will  be  seen  that  this  country  is  rapidly  taking 


252  Combinations, 

rank  with  the  leading  nations  of  Europe,  as  an 
exporter  of  manufactured  products. 

The  character  and  variety  of  the  manufactured 
articles  exported  from  this  country  for  sale  in  for- 
eign markets,  can,  perhaps,  best  be  brought  home  to 
the  reader  by  presenting  a  list,  taken  from  the 
Monthly  Summary  of  Commerce  and  Finance  of 
'the  United  States  for  June,  1902,  showing  the  arti- 
cles of  domestic  manufacture  exported  from  the 
United  States  during  the  year  1901. 

EXPORTS    OF    DOMESTIC    MANUFACTURE    FROM    THE 

UNITED    STATES,    BY    PRINCIPAL    ARTICLES 

DURING  THE   YEAR   ENDING 

JUNE  30,  1901. 

Articles.  Total. 

Agricultural    implements 116,313,434 

Aluminum,  and  manufactures  of 221,245) 

Art  works  :  Painting  and  statuary 344,287 

Asbestos    135.258 

Babbitt   metal    102,1)09 

Asphaltum  and  manufactures 97,851 

Blacking    799.895 

Books,    maps,    etc 3,472.343 

Brass  and  manufactures  of 2,007,450 

Bricks    65«.62« 

Brooms  and  brushes 254,047 

Candles    236,547 

Cars,  carriages,  etc 10.920,9?1 

Celluloid  and  manufactures   211,781 

Cement    438,915 

Chemicals,  drugs,  dyes,  etc 13,312,631 

Clocks  and   watches 2,340,  i  ol 

Coke    1,433, 197 

Coffee  and  cocoa,  prepared   383,036 

Copper  manufactures   43,267,021 

Cork  manufactures    36,717 

Cotton  manufactures    20,272,418 

Dental  goods    252,418 

Earthen,  stone  and  china  ware 512.913 

Fertilizers,  other  than  crude 377,567 

Emery    wheels 163,774 

Fiber  manufactures   4,302,876 

Furniture    of    metal 271,289 

Glass   and   glassware 2,126.309 

Gunpowder  and  other  explosives 1,712,102 

India    rubber    manufactures 3,659,361 


Trusts  and  Monopolies.  253 

Ink    $291,225 

Scientific  instruments 7,361,231 

Iron  and  steel,   and   manufactures   thereof,   as 
follows : 

Iron  ore 175,817 

Bar  iron   884,0;>4 

Ferro-manganese    l,29t> 

All  other    3,763,287 

Scrap  and  old,  fit  only  for  remanufacture. . . .  544,394 
Bars  or  rods  of  steel : 

Wire  rods 336,680 

All    other    2,651,089 

Billets,   ingots,   and   blooms 3,158,239 

Hoop,  band  and  scroll 167,942 

Ingots,   bars  and  rods  of  steel    rails   for  rail- 
ways : 

Iron   32,567 

Steel    10,841,189 

Sheets  and  plates : 

Iron     498,964 

Steel     1,752,873 

Tin  plates,  terne  plates,  and  taggers  tin 66,550 

Structural  iron  and  steel 3,357,023 

Wire    4,104,563 

Builders'   hardware,   saws,   and   tools : 

Locks,  hinges  and  other  builders'  hardware....  5,569,903 

Saws 327,859 

Tools  not  elsewhere  specified 3,306,751 

Car  wheels 203,396 

Castings.  N.  E.   S 1,135,453 

Cutlery  : 

Table   33,647 

All  other   200,640 

Firearms    958,324 

Machinery,  machines,  and  parts  of : 

Cash   registers 873,121 

Electrical    5,812,715 

Laundry   machinery    479,274 

Metal  workings    4,054,313 

Printing  presses  and  parts  of      1,005,929 

Pumps  and  pumping  machinery 2,187,246 

Sewing   machines,   and   parts   of 4,095,663 

Shoe   machinery 953,898 

Steam  engines,  and  parts  of : 

Fire    23,370 

Locomotives    4,039,006 

Stationary    901,888 

Boilers  and  parts  of  engines 1,696,385 

Typewriting   machines,  and  parts  of 2,827,329 

All  other    20,864,352 

Total   machinery 49,814,489 

Nails  and  spikes : 

Cut    575,285 

Wire   982,31 3 

All  other,  including  tacks 257,700 

Pipes  and  fittings   5,139,895 


254  Combinations, 


Safes    V. ..  f  112,068 

Bcales  and  balances 532,640 

Stoves,  ranges,  and  parts  of 548,716 

All  other  manufactures  of  iron  and  steel 15,459,491 

Total  iron  and  steel,  not  including  ore 117,319,320 

Jewelry  and  gold  and  silver  manufactures 1,455,487 

Lamps,    chandeliers,    etc 1,021,435 

Lead  manufactures 671,679 

Leather,  and  manufactures  of 27,923,653 

Lime    29,562 

Malt  liquors 1,723,025 

Marble  and  stone  manufactures 1,544,594 

Matches     88,739 

MuBlcal  instruments 2,780.796 

Oil  cloths    172,635 

Oils,   refined   or  manufactured 65.021,591 

I'aints,  pigments  and  colors 2,036,34a 

I'aper,   manufactures  of 7,438,901 

I'araffln  and  paraflin  wax 6,857,288 

I'erfumery   and   cosmetics 380,9:^4 

I'hotographic     materials 1,098.445 

Plated  ware    517.208 

Silk  manufactures  (and  waste) 253,816 

Soap   1 .509.180 

Spirits,    distilled 3.054,723 

Starch    7 2,005.865 

Straw  and  palm   leaf  manufactures    412.668 

Sugar,   refined  and  confectionery   981,356 

Tin,  and  manufactures  of 516,343 

Tobacco  manufactures   5,092,603 

Toys     280,546 

Trunks,  valises,  etc 115,881 

Varnish    611.459 

Vessels  sold  abroad 1 12.906 

Wood  manufactures 11,099.643 

Wool   manufactures   1,542,733 

Zinc  manufactures    965,510 

All  other  articles 6,317,480 

Total    $412,155,066 

The  table  shown  does  not  include  the  exporta- 
tion of  breadstuffs,  comprising  bread,  wheat  flour, 
com  meal,  oatmeal,  grains  of  all  kind,  and  all 
preparations  of  food  made  from  them,  or  meat, 
dairy  products,  and  other  articles,  all  of  which, 
amount  to  hundreds  of  millions  of  dollars,  but 
which  are  included,  in  the  statistics  prepared  by 
the  Treasury  Department,  under  the  head  of  agri- 
cultural products. 


Trusts  and  Monopolies.  255 

The  exports  of  domestic  manufactures,  strictly 
so-called,  from  the  United  States  during  the  last 
thirteen  years  have  amounted  to  $3,389,931,951, 
as  follows :  $151,102,376  in  1890,  $168,927,315  in 
1891,  $158,510,937  in  1892,  $158,023,118  in  1893, 
$183,728,808  in  1894,  $183,595,743  in  1895,  $228,- 
571,178  in  1896,  $277,285,391  in  1897,  $290,697,- 
354  in  1898,  $339,592,146  in  1899,  $433,851,756 
in  1900,  $412,155,066  in  1901,  $403,890,763  in 
1902. 

With  this  long  list  before  us,  of  articles  which 
have  actually  been  exported  from  this  country  and 
sold  in  foreign  markets  in  competition  with  foreign 
producers,  it  w^ould  seem  to  be  established  beyond 
the  possibility  of  contradiction  that  the  manufac- 
turers of  this  country  are  now  able  to  compete  with 
those  of  the  world  in  the  production  of  these  arti- 
cles. 

The  fact  that  large  quantities  of  the  products  of 
the  American  factories  have  been  sold  abroad — hav- 
ing been,  we  believe,  now  fully  established,  we 
are  led  to  inquire  by  whom  has  this  great  volume 
of  goods  been  created,  and  who  is  it  that  has  thus 
risen  from  the  position  of  mere  local  producers  to 
the  rank  of  manufacturers  of  international  repu- 
tation, and  to  be  competitors  in  the  markets  of  the 
world  ? 

The  combinations  recently  formed,  and  still 
forming,  among  manufacturers  are  steadily  reduc- 
ing the  cost  of  production  to  the  lowest  possible 
point ;  it  has  been  claimed  by  the  promoters  of  com- 
binations that  by  reducing  the  cost  of  production, 
they  would  be  enabled  to  sell  in  foreign  markets, 
thus  opening  up  new  sources  of  profit ;  these  com- 


256  Combinations, 

binations  have  been  sending  their  representatives 
abroad,  and  going  to  considerable  expense  in  de- 
veloping foreign  trade.  The  remarkable  increase 
in  our  exportation  of  manufactured  articles, 
from  $151,102,376  in  1890  to  $433,851,756 
in  1900,  has  been  coincident  with  the  even 
more  remarkable  development  of  the  industrial 
combinations  of  which,  as  shown  by  the  table  given 
from  the  Twelfth  Census,  there  were  only  five  in 
existence  prior  to  1889  while  there  were  185  in 
1900;  and  even  a  most  casual  examination  of  the 
foregoing  list  of  exported  articles,  will  be  sufficient 
to  enable  the  reader  to  discover  in  them  the  prod- 
ucts of  nearly  every  branch  of  manufacture  repre- 
sented by  the  combinations  shown  in  the  table  pre- 
sented in  this  chapter. 

We  are  forced,  then,  to  the  conclusion  that  it  is 
the  industrial  combinations  which  have  attained  to 
this  proud  distinction,  and  have  proved  their  abil- 
ity to  compete  with  the  older  institutions  of  Eu- 
rope. 

The  ability  to  sell  in  foreign  markets  carries 
with  it,  as  a  necessary  incident,  the  power  to  sell 
for  the  same,  or  lower  prices  than  those  demanded 
by  foreign  producers;  but  our  protective  tariff  is 
levied  upon  the  selling  value  of  articles  in  the  for- 
eign market  in  order  to  enable  our  home  producers 
to  charge  higher  prices,  and  for  the  purpose  of  pro- 
tecting them  in  those  higher  prices  until  such  time 
as  they  shall  be  able  to  compete  with  foreign  manu- 
facturers. 

The  question  then  arises,  are  our  industrial 
combinations  charging  high  prices  to  the  home  con- 
sumer, while  they  are  selling  at  low  prices  in  the 


Trusts  and  Monopolies.  257 

foreign  markets?  If  so,  it  is  a  most  grievous  vio- 
lation of  the  spirit  of  the  tariff  law,  for  the  purpose 
of  that  law  is  to  secure  benefits  to  the  American 
citizens,  and  not  to  secure  lower  prices  to  the  peo- 
ple of  Europe  at  the  expense  of  our  home  con- 
sumers ;  nor  merely  to  afford  larger  profits  to  a  few 
manufacturers. 

The  combinations  will,  however,  generally  deny 
that  they  thus  discriminate  in  prices  in  favor  of 
the  foreign  markets;  and  admitting  their  denial 
to  be  true,  we  then  have  this  condition  of  affairs. 
We  have  positive  assurance  that  large  quantities  of 
American-made  articles  are  annually  exported  from 
this  country  which  must,  therefore,  be  sold  in  for- 
eign markets  and  at  foreign  prices ;  and  we  are  as- 
sured that  there  is  no  discrimination  made  between 
the  prices  charged  for  wares  at  home  or  abroad ;  it 
follows,  therefore,  that  these  combinations  are  sell- 
ing their  products  in  this  country  at  the  same  prices 
for  which  similar  articles  are  sold  by  foreign  manu- 
facturers in  foreign  markets,  which  means  that  our 
home  producers  have  ceased  to  avail  themselves  of 
the  protection  afforded  by  the  tariff,  and  that  it  is 
therefore  useless  so  far  as  they  are  concerned. 

We  have,  therefore,  these  two  alternatives  to 
choose  from: — either  our  home  manufacturers  are 
charging  high  prices  at  home  and  low  prices  abroad, 
which  is  an  absolute  abuse  of  the  protection  af- 
forded to  them  by  the  tariff,  or  they  are  selling 
their  goods  in  this  country  for  the  same  prices  at 
which  foreign  manufacturers  are  selling  the  same 
article  in  foreign  markets,  and  therefore  as  cheaply 
as  these  foreign  manufacturers  could  sell  in  this 
country  if  there  were  no  tariff  duties  imposed. 


258  Combinations, 

which  is  making  no  use  whatever  of  the  protective 
tariif. 

In  the  year  1900  the  Department  of  Labor  of 
the  United  States  prepared  a  list  of  questions  for 
the  purpose  of  determining  the  effects  of  indus- 
trial combinations  upon  wages,  prices,  etc.,  and  the 
replies  received  to  these  inquiries  have  been  skill- 
fully classified  and  analyzed  by  Professor  Jere- 
miah W.  Jenks  and  published  in  the  bulletin  of  the 
Department  of  Labor  No.  29,  for  July,  1900,  en- 
titled Industrial  Combinations.  Twenty-nine 
combinations  replied  to  the  questions  relative  to 
the  prices  made  to  the  export  trade  which  are  classi- 
fied by  Professor  Jenks  as  follows :  "Sixteen  stated 
that  their  export  prices  are  the  same  as  the  prices 
within  the  boundaries  of  the  United  States,  due 
allowance  being  made  for  transportation;  three 
more  said  that  they  are  approximately  so,  while  ten 
stated  that  the  prices  differ ;  eight  of  the  ten  giving 
lower  prices  to  foreign  bu3'ers  in  order  to  secure 
their  market,  one  reporting  higher  or  lower  prices 
to  meet  European  competition,  and  one  reporting 
higher  prices  in  foreign  countries." 

Admitting  the  reports  of  these  combinations  to 
be  true  and  to  be  representative  of  their  classes, 
and  in  view  of  what  has  already  been  said  on  the 
subject,  the  situation  which  confronts  us  is  briefly 
this:  a  large  number  of  the  industrial  combina- 
tions are  making  no  use  whatever  of  the  protective 
'  tariff,  while  others  make  only  an  abusive  use  of  it; 
the  tariff  has,  therefore,  ceased  to  be  of  any  further 
legitimate  service  to  them ;  no  one  has  ever  claimed 
that  a  protective  tariff  is  of  any  direct  benefit  to 


Trusts  and  Monopolies.  259 

the  consumer  as  such,  and  since  it  does  not  benefit 
the  consumer  and  has  ceased  to  be  of  any  legiti- 
mate service  to  these  producers,  the  tariff,  so  far 
as  it  applies  to  the  products  of  industrial  com- 
binations, should  be  removed. 

The  tariff  duties  should  be  removed  from  all  ar-  | 
tides  the  production  of  which  is  controlled  by  com-  \ 
binations,  for,  as  has  been  said,  some  of  these  com-  \ 
binations  admit  that  they  afford  lower  prices  to    '• 
foreign  buyers  than  to  home  consumers,  which  is 
a  perversion  of  the  purpose  of  protection;  others 
claim  to  sell   for  the  same  prices   at  home   and 
abroad,  which  is  equivalent  to  saying  that  they  take 
no  advantage  of  the  protection  afforded  them  by 
the  tariff,  while  the  published  tables  of  manu- 
factured articles  exported  from  this  country  afford 
ample  evidence  of  the  ability  of  nearly  all  of  them 
to  compete  with  foreign  manufacturers.    It  is  con- 
trary to  common  justice  and  public  policy  to  con- 
tinue to  afford  protection  to  combinations  whose 
purpose  it  is  to  defeat  every  object  for  the  promo- 
tion of  which,  the  protective  tariff  was  originally 
established. 

The  exportation  of  domestic  manufactures  af- 
fords an  indisputable  test  of  the  ability  of  our  in- 
dustrial combinations  to  sell  as  cheaply  as  foreign, 
producers;  but  in  times  of  heavy  home  consump- 
tion the  capacity  of  our  factories  may  be  taxed 
to  meet  the  demands  of  domestic  trade  and  the  ex- 
ports of  their  products  may  therefore  show  a  tem- 
porary decrease.  This  will,  however,  be  simply 
due  to  the  fact  that  our  manufacturers  have  found 
a  more  profitable  market  at  home,  and  not  to  any 
inability  to  compete  for  the  foreign  trade.     The 


26o  Combinations, 

annual  Treasury  statement  of  our  exports,  while 
it  affords  a  very  appropriate  list  of  articles  from 
which  to  begin  removing  tariff  duties,  cannot, 
therefore,  be  accepted  as  the  only  guide  to  be  fol- 
lowed in  withdrawing  tariff  protection  from 
monopolies,  for  many  combinations  which  are  en- 
gaged in  production  may  not  export  their  products, 
yet  it  is  desirable  that  protection  shall  be  with- 
held from  them,  and  every  legitimate  means  should 
be  employed  to  identify  their  products  and  to  ex- 
clude them  from  the  schedules  of  protected  articles, 
for,  as  we  have  already  shown,  all  of  these  com- 
binations are  organized  for  the  purpose  of  de- 
stroying competition,  and  of  depriving  the  public 
of  every  benefit  which  the  framers  of  the  tariff 
laws  sought  to  secure  to  it. 

There  are  those,  however,  who  attempt  to  ex- 
plain our  exports  of  manufactured  products,  and 
to  excuse  the  practice  of  making  lower  prices  to 
foreign  buyers  than  to  home  consumers,  by  saying 
that  after  the  demands  of  domestic  consumption 
have  been  supplied,  they  can  continue  to  operate 
their  plants  for  the  balance  of  the  year  at  a  less 
proportionate  expense ;  and  in  order  to  give  con- 
tinuous employment  to  their  employees,  they  can 
afford  to  send  this  surplus  product  to  Europe,  and 
to  sell  it  below  the  prevailing  rates  of  prices  in 
this  country.  It  is  something  of  a  revelation  to 
discover  that  these  combinations  are  so  solicitous 
to  secure  steady  employment  for  their  employees; 
but  let  us  inquire  a  little  further  into  this  reduc- 
tion in  the  cost  of  operating  their  plants,  which 
enables  them  to  sell  so  much  more  cheaply  to 
foreign  buyers. 


Trusts  and  Monopolies.  261 

The  best  way  to  prove  or  disprove  a  proposition 
of  this  kind  is  to  attempt  its  practical  demonstra- 
tion by  the  use  of  figures  known  to  represent  the 
true  operating  expenses  of  manufacturing  concerns 
similar  to  those  in  which  the  reduction  in  the  cost 
of  the  production  of  surplus  products  is  said  to 
have  been  effected.  Instead,  however,  of  adopting 
a  set  of  figures  relative  to  the  operation  of  some 
one  particular  factory,  for  the  accuracy  of  which 
the  reader  would  have  to  depend  upon  the  judg- 
ment and  information  of  the  writer,  we  prefer  to 
use  the  figures  furnished  by  the  Census  Depart- 
ment of  the  United  States,  in  volume  seven  of  the 
Twelfth  Census,  relative  to  industrial  combina- 
tions. Tjje  figures  given  relate  to  the  expenses  of 
all  of  the  one  hundred  and  eighty-five  combina- 
tions reported,  but  they  will  serve  our  purpose 
as  well,  and  be,  perhaps,  more  truly  representative 
of  the  real  situation  than  would  the  figures  of  any 
one  plant. 

In  the  table  shown  in  the  Census  the  expenses 
of  the  industrial  combinations  are  classified  under 
the  following  heads:  wages,  salaries,  cost  of  ma- 
terial used  and  miscellaneous  expenses.  It  re- 
quires no  argument  to  show  that  the  item  of  wages 
must  continue  to  increase  with  the  amount  of  the 
product,  and  that  it  cannot  be  even  relatively  re- 
duced whether  the  plant  be  operated  for  ten  months 
or  for  twelve  months  in  the  year.  Under  the 
heading  "salaries"  are  included  salaried  officials, 
general  superintendents,  managers,  clerks,  etc. ;  and 
the  total  salaries  paid  by  the  combinations  during 
the  year  1900  amounted  to  $32,738,208,  which 
amount  is  subdivided  as  follows:  $7,152,067  was 


262  Combinations, 

paid  to  officers  of  corporations  and  $25,586,141  to 
general  superintendents,  managers,  clerks,  etc. 
The  amount  thus  shown  to  have  been  paid  to  sal- 
aried officials  of  corporations  may  be  admitted  to 
be  a  fixed  charge,  which  would  not  have  been  in- 
creased by  the  continuous  operation  of  the  plants, 
but  the  amount  paid  to  general  superintendents, 
managers,  clerks,  etc.,  cannot  be  properly  so 
classed.  In  order  to  be  entirely  fair,  however,  we 
may  grant  that  one-third  of  the  entire  force  of 
superintendents,  managers,  clerks,  etc.,  would  have 
to  be  retained,  even  though  the  plant  were  to  be 
obliged  to  close  down  during  a  portion  of  the 
year,  thus  making  their  salaries  a  fixed  charge 
which  might  properly  be  added  to  the  cost  of 
production  for  home  consumption.  We  then  have, 
including  the  salaries  of  the  officials  of  corpora- 
tions, the  sum  of  $15,680,780  which  may  properly 
be  classified  as  fixed  charges. 

The  materials  used,  like  the  wages  paid,  must 
continue  to  increase  with  the  amount  of  the  output, 
and  having  been  already  reduced  to  about  the 
minimum  cost,  by  their  production  and  sale  in 
quantities  necessary  to  supply  the  large  scale  pro- 
duction of  finished  products  for  the  home  market, 
their  relative  cost  cannot  be  much  further  de- 
creased, whether  the  plants  be  operated  for  a  longer 
or  a  shorter  time. 

Under  the  title  miscellaneous  expenses  are  in- 
cluded rent  of  works,  taxes,  rent  of  offices,  insur- 
ance, interest  and  all  sundry  expenses  not  else- 
where included,  most  of  which  we  may  allow  to 
be  taken  as  fixed  charges,  and  to  be  added  solely 
to  the  cost  of  production  for  home  consumption. 


Trusts  and  Monopolies.  263 

though  it  is  obvious  that  the  expense  of  such 
items  as  light,  heat,  wear  and  tear  of  machinery, 
etc.,  must  continue  to  increase  with  the  operation 
of  the  plant,  and  cannot  fairly  be  classed  as  a 
charge  which  must  be  met  whether  it  is  operated 
or  not. 

We  find,  then,  the  total  possible  fixed  charges 
to  be:  miscellaneous  expenses,  amounting  to  $152,- 
157,700,  and  salaries  of  officers  of  corporations, 
general  superintendents,  managers,  clerks,  etc., 
amounting  to  $15,680,780,  making  a  total  of  $167,- 
838,480.  The  total  value  of  the  products  of  these 
combinations  during  the  census  year,  as  shown  by 
the  same  table  was  $1,667,350,9-49.  Thus,  we  find 
that  in  the  production  of  $1,667,350,949  worth  of 
products,  there  were  incurred  fixed  charges  amount- 
ing to  $167,838,480  which  is  approximately  ten 
per  cent,  of  the  total  value  of  the  products. 

Suppose,  then,  that  the  preparation  of  this 
amount  of  product  or  the  amount  required  for 
home  consumption  would  only  require  the 
plants  to  be  operated  for  ten  months  dur- 
ing the  year,  and  that  the  fixed  charges  suffi- 
cient to  cover  the  whole  year's  operation  of  the 
plants  have  been  paid.  It  would  then  be  possible 
to  continue  to  operate  the  plants  during  the  re- 
mainder of  the  year  for  the  purpose  of  manufac- 
turing surplus  products  intended  for  the  export 
trade,  at  a  reduced  expense  equal  to  the  percentage 
of  the  fixed  charges  to  the  entire  operating  ex- 
penses of  the  business,  and  the  cost  of  the  output 
so  manufactured  would  be  just  that  much  less  than 
the  cost  of  the  goods  produced  for  home  consump- 
tion.    We  have  just  seen  that  the  fixed  charges 


264  Combinations, 

constitute  ten  per  cent,  of  the  cost  of  wares  in- 
tended for  domestic  use,  and  the  so-called  surplus 
product,  or  that  manufactured  for  sale  in  foreign 
markets,  would  therefore  be  ten  per  cent,  less  than 
the  cost  of  the  goods  produced  for  sale  in  this 
country.  This  is  the  full  extent  of  the  reduction 
in  the  cost  that  can  be  effected  in  this  way. 

It  may  also  be  urged  that  these  producers  are 
willing  to  accept  smaller  profits  in  order  to  secure 
foreign  trade,  but  the  expenses  of  selling  in  foreign 
markets  are  much  larger,  the  freight  charges  are 
higher,  and  the  risks  involved  are  much  greater 
than  they  are  in  selling  to  the  home  trade,  and  if 
the  profits  received  are  still  large  enough  to  induce 
those  combinations  to  assume  these  additional  bur- 
dens and  responsibilities,  they  should  be  sufficient 
to  compensate  them  for  engaging  in  the  less  bur- 
densome task  of  supplying  the  demands  of  home 
consumption.  We  must,  therefore,  conclude  that 
the  ten  per  cent,  decrease  which  we  have  shown 
that  it  is  possible  to  effect  in  the  cost  of  produc- 
tion, is  the  total  reduction  that  can  be  made  from 
a  legitimate  price  charged  to  home  consumers,  in 
order  to  enable  manufacturers  to  sell  in  foreign 
markets;  and,  that  if  any  greater  discount  than 
this  is  made  in  the  price  to  foreign  trade,  it  must 
be  due  to  a  decrease  in  the  profit,  and  as  we  are 
not  prepared  to  believe  that  these  combinations  are 
willing  to  go  to  great  additional  expense  and  incur 
much  greater  risks  in  order  to  secure  smaller 
profits  abroad  than  the  investment  of  the  same 
money  would  bring  at  home,  their  disposition  to 
sell  in  foreign  markets  must  be  taken  as  an  indi- 


Trusts  and  Monopolies.  265 

cation  that  they  have  been  reaping  unusually  large 
profits  from  the  American  consumers. 

Since  this  claim  of  reduced  cost  in  the  produc- 
tion of  products  for  foreign  markets  has  been  of- 
fered in  defense  of  the  claims  of  these  combinations 
to  continued  protection  by  tariff  duties,  let  us  in- 
quire to  what  amount  of  protection  they  are  en- 
titled upon  the  showing  made. 

If,  as  is  claimed,  the  reduction  in  the  cost  of 
production,  which  it  is  possible  to  effect  by  in- 
cluding all  the  fixed  charges  of  the  business  in  the 
cost  of  manufacture  for  domestic  use,  is  sufficient 
to  enable  our  industrial  combinations  to  sell  in 
competition  with  foreign  producers  in  foreign  mar- 
kets, and,  as  we  have  already  seen,  the  total  reduc- 
tion which  it  is  possible  to  effect  in  that  way  is 
ten  per  cent.,  it  follows  that  ten  per  cent,  must 
represent  the  difference  in  the  cost  of  production 
in  this  country  and  in  foreign  nations,  for  we  are 
not  willing  to  believe  that  foreign  manufacturers 
cannot  afford  to  sell  on  as  small  margins  of  profit 
as  can  our  own  producers.  If,  then,  ten  per  cent, 
represents  the  difference  in  the  cost  of  produc- 
tion at  home  and  abroad,  it  is  clear  that  the  im- 
position of  a  duty  of  ten  per  cent,  would  prevent 
foreigners  from  underselling  our  manufacturers 
in  our  home  markets,  for  the  amount  of  the  duty 
would  in  effect  equalize  the  cost  of  production 
and  place  the  producers  on  equality,  whereas  a 
duty  of  twelve  to  fifteen  per  cent,  would  suffice 
to  exclude  foreign  manufacturers  from  our  market 
altogether. 

The  prevailing  rates  of  tariff  duties,  as  we  have 
already  shown  in  the  beginning  of  this  chapter. 


266  Combinations, 

average  fifty  per  cent,  of  the  value  of  the  article 
upon  which  it  is  laid,  which  is  five  times  the 
amount  of  the  protection  to  which  the  products  of 
our  combinations  would  appear  to  be  entitled  under 
the  most  favorable  showing.  What,  then,  becomes 
of  the  forty  per  cent,  of  protection  which  is  af- 
forded in  excess  of  the  ten  per  cent,  which  is 
claimed  to  be  necessary  in  order  to  equalize  the 
cost  of  production?  If  ten  per  cent,  is  sufficient 
to  equalize  the  cost  of  production,  which  includes 
all  that  is  paid  out  in  wages,  for  material,  and  all 
expenses  of  the  business,  it  is  clear  that  the  re- 
maining forty  per  cent,  of  the  protection  afforded 
must  go  to  swell  the  profits  of  the  manufacturers. 
But  some  will  tell  us  that  no  advantage  is  taken 
of  this  additional  forty  per  cent,  of  protection,  and 
that  prices  are  not  raised  unnecessarily  high  on 
account  of  it.  Why,  then,  we  ask,  should  this  un- 
necessary protection  be  retained  as  a  temptation  to 
the  less  scrupulous  to  extort  exorbitant  profits 
whenever  an  opportunity  to  do  so  is  presented? 

Whether  these  combinations  are  taking  full  ad- 
vantage of  the  opportunity  which  the  high  pro- 
tection affords  them,  and  are  charging  excessively 
high  prices  to  American  consumers ;  or  whether,  as 
many  of  them  claim,  they  are  selling  to  home  con- 
sumers at  the  same  prices  for  which  they  sell 
abroad,  and  are  thus  making  no  use  of  the  pro- 
tection offered  them,  it  is  remarkable  that  none 
of  them  are  ever  willing  to  consent  to  a  reduction 
of  the  tariff  upon  their  products.  A  notable  in- 
stance of  this  has  recently  been  presented  in  the 
case  of  the  anthracite  coal  combination. 

It  had  popularly  been  supposed  that  the  tariff 


Trusts  and  Monopolies.         267 

on  anthracite  coal  was  merely  nominal,  and  that 
it  had  little  or  no  effect  in  enhancing  the  price  of 
coal ;  but  in  view  of  the  great  scarcity  of  fuel  and 
the  consequent  high  prices,  due  to  the  recent  strike 
in  the  anthracite  coal  region,  President  Roosevelt, 
in  his  message  to  the  second  session  of  the  Fifty- 
seventh  Congress,  recommended  that  the  tarilf  be 
removed  from  anthracite  coal.  Measures  were  at 
once  prepared  to  carry  into  effect  the  President's 
recommendation,  but  notwithstanding  the  extreme 
necessity  to  which  the  people  in  all  parts  of  the 
country  were  reduced  for  want  of  fuel,  and  the 
supposed  indifference  of  the  anthracite  coal  com- 
bination, a  determined  opposition  at  once  developed 
to  the  repeal  of  the  duty,  and  it  became  evident 
that  a  compromise  was  all  that  could  be  hoped  for. 
A  bill  was  then  passed  repealing  the  duty  on  an- 
thracite coal  for  the  period  of  one  year. 

With  this  record  before  us  of  successful  partici- 
pation by  our  home  manufacturers  in  the 
trade  of  foreign  markets,  and  in  view  of 
the  small  difference  which  it  is  possible  to  make 
in  the  cost  of  production,  even  by  throwing  the 
whole  burden  of  the  fixed  charges  upon  the  home 
consumer,  we  are  forced  to  believe  that  our  indus- 
trial combinations  can  produce  as  cheaply  as  any 
other  manufacturers  in  the  world ;  but  the  rapidity 
with  which  these  combinations  are  increasing  in 
numbers  and  in  power,  leads  us  to  believe  that 
they  are  reaping  much  larger  profits  than  could  be 
derived  from  the  sale  of  their  entire  product  at  the 
same  prices  for  which  they  are  obliged  to  sell  that 
portion  of  it  which  they  send  abroad,  and  the  des- 
perate determination  with  which  they  resist  every 


268  Combinations, 

attempt  to  lower  the  tariff  duties  upon  their  prod- 
ucts, as  has  recently  been  illustrated  by  the  action 
of  the  beet-sugar  interests  and  by  the  anthracite 
coal  combination,  confirms  the  belief  that  the  pro- 
tection afforded  by  the  tariff  is  being  used  for  the 
purpose  of  protecting  them  in  charging  high  prices 
at  home,  while  they  are  able  to  sell  for  much  lower 
prices  abroad.  It  would  seem,  therefore,  to  be 
the  plain  and  imperative  duty  of  the  National 
Government  to  remove  the  tariff  duties  from  all 
articles  which  are  produced  or  controlled  by  com- 
binations, trusts  or  monopolies  of  whatever  kind, 
and  thus  to  diminish  their  power  to  levy  tribute 
upon  the  American  people  for  the  sole  purpose  of 
Bwelling  their  private  treasuries. 

But  we  are  told  that  by  removing  the  duties 
from  articles  the  production  of  which  is  controlled 
by  combinations,  we  would  not  only  cripple  the 
combinations,  but  would  also  destroy  the  business 
of  the  individual  manufacturers  who  are  engaged 
in  the  production  of  the  same  articles.  Let  us  see 
if  this  is  true. 

The  purpose  of  the  protection  afforded  by  the 
tariff  is  to  enable  home  manufacturers  to  demand 
high  prices  for  their  products,  and  to  prevent  them 
from  being  undersold  by  foreign  producers.  One 
of  the  purposes  of  our  industrial  combinations  is 
to  acquire  the  ability  to  produce  as  cheaply  as 
foreign  manufacturers  and  to  sell  their  products 
in  the  foreign  markets,  and  the  published  statis- 
tics of  the  exports  of  our  domestic  manufactures 
appear  to  furnish  conclusive  proof  that  many  of 
them  have  succeeded  in  accomplishing  their  pur- 
pose.    We  have,  then,  individual  manufacturers 


Trusts  and  Monopolies.  269 

who  are  protected  from  foreign  competition  by 
high  protective  duties,  and,  side  b}^  side  with  them, 
combinations  which  are  active  competitors  of  those 
same  foreign  producers  from  whose  competition 
our  manufacturers  are  protected.  If  our  domes- 
tic combinations  can  compete  with  foreign  manu- 
facturers abroad,  they  must  be  even  better  able  to 
compete  with  them  at  home  in  our  own  country, 
where  the  extra  burden  of  ocean  transportation 
must  be  borne  by  the  foreigner  and  be  saved  by 
the  domestic  producers,  and  since  the  tariff  does 
not  protect  our  individual  manufacturers  against 
homemade  products  of  combinations  or  trusts,  what 
is  there  to  protect  them  from  this  competition 
which  is  capable  of  being  even  more  severe  than 
that  of  the  foreigner  from  whom  they  have  already 
sought  and  secured  protection?  Are  we  to  suppose 
that  the  combinations  will  prove  to  be  less  active 
competitors  of  our  individual  manufacturers  than 
the  foreigners  would  be?  Experience  has  already 
shown  that  they  can,  and  will,  undersell  the  in- 
dividual producer  whenever  and  wherever  it  be- 
comes necessary,  in  order  to  enable  them  to  secure 
control  of  the  market,  and  the  power  of  most  of 
these  combinations  is  built  upon  the  ruins  of  the 
once  prosperous  business  of  individual  producers. 
Are  we  to  be  expected  to  believe  that  the  combina- 
tions and  monopolies  will  be  more  merciful  to  their 
individual  competitors  than  they  are  to  the  con- 
sumers of  their  products?  No;  we  must  recog- 
nize the  fact  that  the  tariff  affords  no  real  protec- 
tion to  the  individual  manufacturer,  wherever  he 
is  opposed  by  a  combination  of  sufficient  size  to 
control  the  market. 


270  Combinations, 

Our  individual  manufacturers  may  be  able  to 
produce  as  cheaply  as  the  manufacturers  of  Europe, 
but  we  are  not  discussing  that  point.  We  have 
every  reason,  however,  to  believe  that  our  indus- 
trial combinations  certainly  are  able  to  produce 
as  cheaply,  and  that  they  may  at  will  depress 
prices  to  the  level  of  the  foreign  market,  or  raise 
them  to  the  highest  level  to  which  the  tariff  af- 
fords protection.  Thus  the  tariff  is  made  to  serve 
the  purpose  of  the  combinations,  and  if  the  indi- 
vidual manufacturers  derive  any  benefit  from  it, 
it  is  merely  during  the  will  and  pleasure  of  the 
combinations  to  allow  them  to  do  so.  Instances 
have  already  been  shown  of  the  power  of  monopo- 
lies to  destroy  competition  by  the  arbitrary  rais- 
ing and  lowering  of  prices  in  this  way,  and  it  makes 
no  difference  whether  the  articles  produced  or  dealt 
in  are  protected  by  tariff  duties  or  not,  save  that 
the  tariff  excludes  foreign  competition  altogether, 
and  to  that  extent  facilitates  the  control  of  the 
home  market  or  domestic  combinations  or  monop- 
olies. 

We  are  also  frequently  reminded  that  combina- 
tions and  monopolies  have  been  formed  in  the  pro- 
duction of  articles  upon  which  there  are  no  tariff 
duties  imposed,  and  this  is  advanced  as  an  evidence 
of  the  fact  that  combinations  can  exist  independ- 
ently of  tariff  protection.  In  reply  to  this  we 
would  say  that  the  fact  that  one  or  more  combina- 
tions exists  independently  of  tariff  protection,  does 
not  in  any  way  tend  to  prove  that  others  may  not 
be  largely,  or  even  entirely,  dependent  upon  it. 

We  wish  to  repeat  that  we  have  not  attempted  to 
prove  that  combinations  are  dependent  upon  the 


Trusts  and  Monopolies.  27B 

tariff,  but  rather  that  they  are  independent  of  it.[ 
It  affords  to  them  a  protection  which  is  no  longer] 
necessary  to  enable  them  to  pursue  their  legiti-" 
mate  business,  and  which  they  now  use  merely  as  a 
means  of  extorting  high  prices  from  the  American 
consumers,  while  they  are  at  the  same  time  dis- 
playing their  ability  to  compete  with  those  foreign 
manufacturers  against  whose  products  they  are 
receiving  protection. 

We  admit,  and  have  shown  by  the  table  of  com- 
binations herein  published,  that  there  are  com- 
binations and  monopolies  which  receive  no  pro- 
tection from  the  tariff,  and,  for  the  purpose  of  this 
discussion,  we  are  willing  to  admit  that  there  may 
be  industries  and  individual  manufacturers  which 
are  deserving  of,  and  entitled  to  receive-tariff  pro- 
tection ;  but  the  same  table  also  shows  that  a  great 
majority  of  the  combinations  which  have  been 
formed  are  engaged  in  the  production  of  tariff 
protected  articles,  and  the  record  of  the  exporta- 
tion of  domestic  manufactures  from  this  country, 
appears  to  show  further  that  a  large  majority  of 
these  combinations  are  able  to  sell  their  products 
abroad  in  competition  with  the  products  of  foreign, 
manufacturers,  and  that  they  are  therefore  able 
to  compete  with  these  foreign  manufacturers  in 
our  home  market  and  require  no  tariff  protection. 

We  therefore  contend,  that  whenever  a  sufficient 
number  of  producers  to  represent  fifty  per  cent,  or 
more  of  the  output  of  any  one  industry  combine 
together, — they  forfeit  all  further  right  to  tariff 
protection.  They  then  take  the  matter  of  protec- 
tion into  their  own  hands ;  they  have  the  indi- 
vidual producers  completely  at  their  mercy  and  can 


272  Combinations, 

deprive  them  of  the  benefits  of  tariff  protection  at 
will;  and  since  the  individual  producers  cannot 
be  protected  against  the  competition  of  the  combi- 
nations, the  power  of  the  combinations  to  levy  ex- 
cessive charges  upon  the  people  under  the  shelter 
of  tariff  protection,  should  be  destroyed  by  remov- 
ing the  tariff  duties  altogether  from  all  articles, 
the  production  of  which  is  controlled  by  combina- 
tions, trusts,  or  monopolies  of  any  kind. 


Trusts  ,aad,  Monopolies.         273 


CHAPTER  X. 

REMEDIES. 

The  first  and  most  fundamental  purpose  of 
every  government  is  the  protection  of  the  life,  lib- 
erty and  property  of  its  citizens. 

When  man  first  ceased  to  roam  the  world  in 
savage  freedom,  and  became  a  member  of  organ- 
ized society,  he  surrendered  the  right  to  wage  war 
upon  his  neighbor,  and  yielded  to  society  the  right 
to  make  laws  for  the  control  of  his  intercourse 
with  his  fellow-man.  In  return  for  this,  he  re- 
ceived the  assurance  that  the  government  would, 
by  its  duly  appointed  officers,  afford  him  protection 
to  life,  liberty  and  property,  and  make  laws  which, 
would  secure  to  him  the  greatest  possible  amount  of 
freedom  consistent  with  the  rights  of  every  other 
member  of  the  community:  and  his  descendants 
have  inherited  his  rights  under  this  unwritten  con- 
tract. 

Mutual  concession  is  the  foundation  of  all  so- 
ciety. The  power  of  the  wealthy  depends  upon  the 
strength  of  society,  and  its  ability  to  afford  them 
protection.  Let  the  stability  of  a  government  be 
shaken,  and  a  financial  panic  will  immediately; 
ensue,  and  the  confidence  of  the  wealthy  disappear. 
The  strength  of  society  depends  upon  the  readi- 
ness of  the  people  to  support  it,  to  obey  its  lawSj, 


274  Combinations, 

and  to  respond  to  the  demands  of  its  officers;  to 
support  it  with  their  money  by  paying  taxes,  and 
with  their  lives  in  the  enforcement  of  its  laws,  or 
in  waging  war  in  defense  of  its  rights  when  neces- 
sary. Can  any  one  doubt,  then,  that  the  first  and 
highest  function  of  every  government  is  the  pro-* 
tection  of  the  rights  of  the  whole  people,  whose 
mutual  sacrifice  brought  it  into  being,  and  whose 
constant  support  is  necessary  to  its  preservation? 
There  would  be  no  difference  in  principle 
whether  a  foreign  prince  were  to  come  with  force 
of  arms  to  our  sliores  to  take  possession  of  our  land, 
and  then  to  exact  tribute  from  the  people  for  the 
privilege  of  living  upon  it,  or  whether  a  syndicate 
of  our  own  citizens  were  to  secure  title  to  the  same 
lands  by  purchase,  and  then  to  proceed  to  exact 
an  exorbitant  rental  for  the  use  of  it;  or,  again, 
whe'ther  the  foreign  conqueror  were  to  assume  the 
absolute  control  of  the  production  of  some  one  of 
the  necessaries  of  life,  and  then  to  raise  its  price 
to  an  unreasonable  fi<rure,  or  suspend  its  produc- 
tion altogether,  at  pleasure;  or  whether  our  do- 
mestic syndicate  were  to  acquire  control  of  the  same 
commodity  by  purchasing  the  source  of  production, 
and  then,  by  exercising  the  power  of  monopoly,  to 
proceed  to  oppress  the  people  as  mercilessly  as  any 
foreign  conqueror  might  do.  In  either  case,  it 
would  be  the  plain  and  imperative  duty  of  the 
government  to  relieve  the  people  from  the  unjust 
oppression  to  which  they  were  being  subjected. 
The  remedy  might  not  be  the  same  in  both  cases, 
and  the  people  might  be  a  little  more  tolerant  and 
slower  to  demand  the  restoration  of  their  rights 
in  one  case  than  in  the  other ;  but  relief  must  come 


Trusts  and  Monopolies.         275 

in  either  case,  and  come  before  it  is  too  late,  or 
revolution,  if  not  anarchy  will  be  certain  to  result. 

This  right  of  every  individual  to  protection,  and 
the  corresponding  obligation  on  the  part  of  the 
government  to  afford  it,  may  seem  to  be  more  clearly 
recognized  by  some  forms  of  government  than  by 
others ;  but  they  are  equally  binding  upon  all,  and 
it  is  merely  a  matter  of  time  and  development  until 
they  shall  become  generally  recognized  as  the  most 
important  considerations  for  the  preservation  and 
development  of  which  all  governments  are  formed. 
Blackstone,  speaking  of  this  subject  in  his  "Com- 
mentaries on  the  Laws  of  England,^'  says:  "And 
this  is  what  we  mean  by  the  original  contract  of 
society;  which,  though  perhaps  in  no  instance  it 
has  ever  been  formally  expressed  at  the  first  in- 
stitution of  a  state,  yet  in  nature  and  reason  must 
always  be  understood  and  implied,  in  the  very  act 
of  associating  together;  namely,  that  the  whole 
should  protect  all  its  parts  and  that  every  part 
should  pay  obedience  to  the  will  of  the  whole;  or, 
in  other  words,  that  the  community  should  guard 
the  rights  of  each  individual  member,  and  that  (in 
return  for  this  protection)  each  individual  mem- 
ber should  submit  to  the  laws  of  the  community; 
without  which  submission  of  all  it  was  impossible 
that  protection  could  be  certainly  extended  to  any.'' 

Numerous  revolutions,  from  the  time  of  the 
Magna  Charta  down  to  the  American  Kevolution, 
have  served  to  fix  this  principle  most  clearly  in 
the  common  law  of  England  and  the  Constitution 
of  the  United  States,  and  those  of  the  several 
states  recognize  it  as  a  part  of  the  fundamental 
law  of  this  country. 


276  Combinations, 

Constitutions  are  always  written  to  provide  for 
the  conditions  which  obtain  at  the  time  of  their 
adoption,  and  to  anticipate  so  far  as  practicable 
those  which  are  likely  to  arise  in  the  future;  but 
time  and  progress  are  always  certain  to  bring 
about  situations  which  seem  to  be  beyond  the 
limits  of  the  constitutional  provisions,  and  with 
w^hich  the  people  therefore  seem  powerless  to  deal. 
We  should  bear  in  mind,  however,  that  constitu- 
tions are  made  for  the  benefit  of  the  people,  and 
that  whatever  right  there  is  inherent  in  the  people, 
will  always  prevail  in  the  end,  even  though  consti- 
tutions may  have  to  be  changed  or  set  aside  in  order 
to  accomplish  it. 

The  calamities  attending  the  American  civil 
war  of  1861,  were  in  a  large  measure  due  to  a  fail- 
ure to  recognize  this  absolute  right  of  the  people 
to  control,  in  spite  of  constitutional  or  other  artifi- 
cial limitations.  The  Constitution  of  the  United 
States  recognized  the  right  of  the  people  of  the 
South  to  hold  slaves,  and  they  felt  perfectly  se- 
cure in  their  right,  believing  that  no  power  could 
deprive  them  of  it.  But  they  went  too  far  in  their 
confidence;  they  afforded  the  opportunity,  and  the 
North  took  advantage  of  it,  destroyed  the  insti- 
tution of  slavery,  as  a  war  measure,  and  amended 
the  Constitution  afterwards. 

Another  instance  of  the  arrogance  of  power  and 
vested  rights,  has  just  been  afforded  in  the  case  of 
the  anthracite  coal  strike  which  prevailed  through- 
out the  summer  and  part  of  the  fall  of  1902.  The 
miners  refused  to  work  under  existing  conditions, 
and  the  operators  could  not  get  a  sufficient  number 
of  men  to  operate  the  mines.    The  supply  of  coal 


Trusts  and  Monopolies.         277 

was  rapidly  becoming  exhausted  throughout  the 
country;  its  price  rose  to  double  that  ordinarily 
demanded,  and  in  many  places  hard  coal  could  not 
be  had  at  any  figure.  Winter  was  at  hand,  and 
great  suffering  for  want  of  fuel  was  threatening  the 
people;  yet  the  coal  operators  persistently  refused 
to  submit  the  matters  in  dispute  to  arbitration,  or 
to  make  any  settlement  whatever  with  their 
former  employees,  short  of  an  absolute  sur- 
render of  their  claims.  The  President  of 
the  United  States,  several  United  States  Sena- 
tors, and  the  Governors  of  the  two  largest 
states  in  the  Union,  pleaded  with  them  for  weeks 
in  vain,  the  operators,  all  the  while,  declaring  their 
determination  to  stand  upon  their  absolute 
rights,  under  existing  laws,  to  use  their  pri- 
vate property  as  they  saw  fit;  but  they  were 
finally  prevailed  upon  to  submit  the  matter  to  arbi- 
tration before  any  more  serious  consequences  re- 
sulted. 

It  is  impossible  to  tell  what  might  have  been  the 
result  of  a  continuation  of  the  policy  adopted  and 
maintained  by  the  coal  operators  for  so  many 
months.  It  is  certain,  however,  that  they  would  not 
long  have  been  allowed  to  keep  the  coal  locked  up 
in  the  earth,  while  the  people  were  suffering  from 
cold  and  disease  in  consequence  of  the  want  of  fuel. 
The  common  people  are  patient  and  slow  to  resent 
an  injury;  they  may  endure  much  suffering  and 
many  wrongs  for  a  time,  but  they  will  at  last  be 
moved  to  anger,  and  when  they  do  rise  in  their 
might  and  take  the  law  into  their  own  hands,  no 
mere  conventional  forms  or  regard  for  vested  rights 
can  restrain  them.    The  means  which  they  employ 


278 


Combinations, 


may  not  always  be  the  wisest  or  the  best,  but  they 
are  usually  sweeping  and  thorough,  and  are  always 
most  disastrous  for  those  who  have  excited  their 
wrath. 
I        We  believe  that  we  have  now  made  this  principle 
I    sufficiently  clear,  namely,  that  the  chief  purpose  of 
I    government  is  to  protect  the  rights  of  every  citizen, 
:    and  that  the  power  of  redress  against  every  wrong, 
alwa3's  resides  in  the  people.     We  believe  that  a 
'     more  general  recognition  of  this  fact  by  monopo- 
lists will  afford  the  first,  and  a  most  effective  pro- 
tection against  the  abuse  of  monopolistic  power. 
j^     Corporations,  combinations,  trusts,  and  all  those 
who  control  large  aggregations  of  capital  should 
remember  that  their  security  and  their  power  rest 
solely  upon  the  will  and  pleasure  of  the  common 
people.    They  should  bear  in  mind  that  all  supreme 
power  resides  in  the  people,  and  that  the  powers  of 
government  are   merely   delegated   powers;    that 
constitutions  are  merely  obstructions  to  the  free 
manifestations  of  the  popular  will,  agreed  to  for 
the  sake  of  convenience  and  expediency,  but  which, 
may  be  swept  aside  at  any  time  by  the  powers 
which  made  them. 

"Power  in  the  people  is  like  the  sun,  native, 
original,  inherent,  and  unlimited  by  anything  hu- 
man. In  government  it  may  be  compared  to  the 
reflected  light  of  the  moon,  for  it  is  only  borrowed, 
delegated  and  limited  by  the  intention  of  the  peo- 
ple, whose  it  is,  and  to  whom  governors  are  to  con- 
sider themselves  as  responsible,  while  the  people 
are  responsible  only  to  God;  themselves  being  the 
losers,  if  they  pursue  a  false  scheme  of  politics." 


Trusts  and  Monopolies.  279 

(Burgh's  "Political  Disquisitions,"  Vol.  I.,  Bk.  1, 
Ch.  2.) 

Our  republican  form  of  government  affords  to 
the  people  a  temperate  and  peaceable  means  of  ex- 
pressing their  will  through  the  instrumentality  of 
the  ballot,  and  they  are  naturally  disposed  to  abide 
by  the  restrictions  which  they  have  thrown  about 
themselves;  but  if  combinations  of  capital, 
by  changing  from  one  form  of  organization  to 
another,  or  by  removing  from  the  jurisdiction 
of  one  state  into  that  of  another,  continue  to 
seek  refuge  behind  some  provision  of  constitutional 
or  statutory  law,  from  which  position  of  fancied  se- 
curity they  hope  to  be  able  to  prey  upon  the  rights 
and  necessities  of  the  people,  they  will  find  that 
these  protections  are  worth  but  little  more  than 
the  ink  it  took  to  write  them,  whenever  the  people 
resolve  that  they  shall  be  removed. 

But  if,  on  the  other  hand,  these  combinations  will 
recognize  the  fact,  that  the  rights  of  the  public 
must  be  respected  no  matter  what  it  may  cost  to 
secure  it,  if  they  will  be  satisfied  with  reasonable 
profit,  and  will  be  content  to  allow  to  the  public  a 
fair  share  of  the  benefits  of  their  improved  facili- 
ties for  production,  they  will  find  the  people  ready 
to  allow  them  all  the  facilities  and  powers  neces- 
sary to  conduct  their  business  in  the  manner  and  on 
such  a  scale  as  the  requirements  of  the  age  may 
demand.  It  is  the  fear  of  monopolies  and  of  the 
abuse  of  the  powers  of  corporations  which  has  led 
to  this  continual  warfare  upon  the  growth  of  cor- 
porate powers,  and  not  any  disposition  to  deprive 
capital  of  its  legitimate  profits  in  business. 

The  great  aggregations  of  capital  which  menace 


280  Combinations, 

the  public  interests,  and  with  which  we  are  con- 
cerned in  this  chapter,  have  nearly  all  now  assumed 
the  form  of  corporations.  Those  which  still  retain 
the  trust  form,  or  other  forms  of  agreement,  may 
generally  be  reached  by  the  anti-trust  statutes  of 
the  several  states,  or  by  the  common  law,  and  the 
large  amounts  of  capital  owned  by  single  individ- 
uals are  in  most  instances  invested  in  the  stocks  of 
corporations;  so  it  is  chiefly  of  corporations  that 
we  shall  now  speak. 

Believing,  then,  that  good  faith  both  on  the  part 
of  corporations  and  on  that  of  the  public,  a  mutual 
recognition  of  each  other's  rights,  and  confidence 
in  each  other's  fidelity,  will  prove  to  be  the  most 
effective,  the  most  natural,  and  the  most  enduring 
remedy  that  can  be  applied  to  the  present  strife 
between  the  corporations  and  the  people,  let  us  in- 
quire in  what  way  can  these  be  best  secured. 

Good  faith  and  fair  dealing,  or  honesty  and  fair- 
ness of  purpose,  cannot  be  created  by  legislation. 
We  may  impose  penalties  for  the  gross  violation  of 
them,  but  these  can  only  hope  to  reach  their  most 
conspicuous  offenses  which,  like  the  great  deeds 
of  individuals,  form  but  a  small  portion  of  their 
life's  work.    So  long  as  the  disposition  is  evil  and^ 
the  opportunity  is  afforded,  there  will  always  bej 
quibbling  and  evasion.     Honesty,  to  be  effective,! 
must  come  from  within.     Dishonesty  in  corpora-* 
tions,  like  dishonesty  in  individuals,  does,  however, 
in  a  measure  bring  about  its  own  punishment ;    for 
unfairness  on  one  side  is  certain  to  induce  antago- 
nism and  a  corresponding  unfairness  on  the  other, 
which  usually  results  in  a  loss  to  both  parties.    It 


Trusts  and  Monopolies.  2811 

is  this  deadlock  of  mutual  mistrust  that  we  wish  to 
dissipate. 

We  can,  however,  encourage  the  growth  of  these 
virtues  in  corporations  by  diminishing  the  oppor- 
tunities of  doing  evil,  by  letting  in  the  sunlight 
upon  the  dark  and  hidden  by-ways,  and  thus  ex- 
posing their  every  act  to  public  view.  There  is 
nothing  that  helps  to  encourage  the  growth  of  hon- 
esty so  much  as  the  full  light  of  day. 

Confidence,  on  the  other  hand,  can  be  directly 
fostered  and  promoted  by  legislation.  A  full 
knowledge  of  all  the  facts  and  circumstances,  is  the 
only  true  basis  of  confidence  in  human  affairs, 
and  by  affording  this  knowledge  to  the  public,  the 
growth  of  honesty  and  fair  dealing  will  also  be 
encouraged,  both  of  which  must  be  found  to  exist, 
or  the  knowledge  gained  will  tend  to  destroy  rather 
than  to  inspire  confidence;  but  in  order  to  obtain 
this  necessary  knowledge,  there  must  be  public 
supervision  of  some  kind.  Corporations  are  cre-[ 
ated  by  the  legislative  power  of  the  people,  exer- 
cised by  their  representatives  in  general  assembly;/ 
they  receive  their  power  from  the  people ;  they  re-* 
ceive  their  immunities  and  privileges  from  the; 
public;  their  operations  directly  affect  the  inter-} 
ests  of  the  public,  and  it  is  clearly  necessary,  there-\ 
fore,  that  it  should  possess  complete  knowledge  of 
the  affairs  of  corporations  in  order  to  be  able  to 
understand  what  should  justly  be  granted  and  what 
withheld.  By  whom  shall  this  supervision  be  ex- 
ercised is  what  we  shall  now  inquire. 

The  importance  of  the  subject  considered  as  to 
its  effect  upon  the  welfare  of  the  people ;  the  extent 
and  variety  of  the  combinations  and  corporations 


282  Combinations, 

to  be  affected,  operating  as  they  do  in  every  state 
and  territory  in  the  Union ;  and  the  apparent  con- 
flict between  the  purposes  of  the  legislative  provis- 
ions of  the  several  states  in  relation  to  combinations 
and  corporations  would  seem  to  stamp  it  as  a  sub- 
ject requiring  national  regulation  and  control.  The 
Government  of  the  United  States,  however,  is  a 
government  having  merely  certain  enumerated  pow- 
ers. It  does  not  possess  all  the  usual  inherent  rights 
and  powers  of  sovereignty,  and  is  limited  to  the  ex- 
ercise of  those  powers  which  have  been  delegated  to 
it  by  the  states.  In  order,  therefore,  to  enable  Con- 
gress to  assume  control  over  this  subject,  it  must 
be  brought  fairly  within  the  scope  of  the  enumer- 
ated powers  granted  to  Congress  by  the  Constitu- 
tion of  the  United  States. 

The  only  industry  over  which  Congress  is  given 
any  express  power  of  control  is  commerce  with 
foreign  nations,  and  among  the  several  states  and 
with  the  Indian  tribes ;  but  the  combinations  and 
corporations  with  which  we  have  chiefly  to  do  in 
this  chapter  are,  for  the  most  part,  engaged  in 
manufacture,  mining,  and  kindred  industries,  the 
greater  part  of  which  are  conducted  wholly  within 
the  jurisdiction  of  some  one  state  or  states,  and 
merely  employ  interstate  commerce  as  a  means  of 
transporting  their  products.  These  corporations, 
then,  do  not  fall  within  the  powers  conferred  upon 
Congress  unless  the  transportation  of  their  products 
in  commerce  among  the  states,  gives  Congress  the 
right  to  assume  control  over  them.  In  the  case  of 
the  United  States  versus  tlie  E.  C.  Knight  Com- 
pany, 156  United  States  Report,  P.  1,  the  Supremo 
Court  of  the  United  States  held  thst  a  company  ep.- 


Trusts  and  Monopolies.  283 

gaged  in  the  business  of  manufacturing,  within 
the  bounds  of  any  state,  even  though  it  might  em- 
ploy interstate  commerce  in  the  transportation  of 
its  products,  was,  nevertheless,  subject  solely  to  the 
jurisdiction  of  the  state;  that  Congress  had  no 
power  to  interfere  with  the  affairs  of  the  company 
so  long  as  it  did  not  attempt  to  regulate  interstate 
commerce;  and  that  the  shipment  of  its  products 
was  merely  an  incident  to  its  principal  business  of 
manufacture,  and  did  not  constitute  such  an  inter- 
ference with  commerce  among  the  states  as  would 
bring  the  case  within  the  jurisdiction  of  Congress. 
The  Supreme  Court  has  also  repeatedly  declared 
that  the  power  of  Congress  to  regulate  commerce 
does  not  imply  the  power  to  regulate  the  incidents 
of  commerce. 

We  are  therefore  obliged  to  conclude  that  Con- 
gress has  not  the  power  to  assume  the  general 
supervision  and  control  of  these  combinations  and 
corporations. 

Many  writers  and  statesmen  have  urged  the 
necessity  of  amending  the  Constitution  of  the 
United  States  so  as  to  enable  Congress  to  assume 
supervision  and  control  over  all  combinations, 
trusts,  corporations,  or  other  aggregations  of  capi- 
tal which  may  possess,  or  "seek  to  create  monopolies 
of  any  kind;  but  no  definite  form  of  amendment 
to  the  Constitution,  by  which  to  confer  these 
powers  upon  Congress,  has  yet  been  agreed  upon 
by  the  friends  of  this  method  of  procedure. 

An  amendment  to  the  Constitution  of  the  United 
States  for  the  purpose  of  granting  these  powers 
to  Congress,  was  proposed  in  the  House  of  Kepre- 
Bentatives  during  the  first  session  of  the  fifty- 


284  Combinations, 

sixth  Congress,  in  March,  1900,  by  George  W.  Ray, 
of  the  State  of  New  York,  the  provisions  of  which 
were  as  follows: 

"Sec.  1.  All  powers  conferred  by  this  article 
shall  extend  to  the  several  states,  the  territories, 
the  District  of  Columbia  and  all  territory  under 
the  sovereignty  and  subject  to  the  jurisdiction  of 
the  United  States. 

"Sec.  2.  Congress  shall  have  power  to  define, 
regulate  and  'control,  prohibit  or  dissolve  trusts, 
monopolies  or  combinations  whether  existing  in 
the  form  of  a  corporation,  or  otherwise.  The  several 
states  may  continue  to  exercise  such  power  in  any 
matter  not  in  conflict  with  the  laws  of  the  United 
States. 

"Sec.  3.  Congress  shall  have  power  to  enforce 
the  provisions  of  this  article  by  appropriate  legisla- 
tion." 

This  amendment  was  referred  to  a  committee  by 
which  it  was  favorably  reported,  and  on  June  1, 
1900,  it  received  the  vote  of  the  majority  of  the 
members  present  and  voting  in  the  house,  154  mem- 
bers voting  for  it,  but  failed  of  the  two-thirds  vote 
necessary  for  its  adoption. 

As  may  be  seen  at  a  glance,  this  amendment 
would  give  to  Congress  almost  unlimited  power  over 
all  combinations,  corporations,  etc.,  which  tend 
in  any  way  to  create  monopoly.  As  Con- 
gress would  have  the  sole  right  to  judge 
of  the  existence  of  the  tendency  to  monopoly, 
and  since  it  could  not  be  in  a  position  to 
properly  judge  of  the  existence  of  the  tendency 
unless  it  were  familiar  with  the  internal  af- 
fairs of  corporations,  it  follows  that  Congress  might 


Trusts  and  Monopolies.  285 

soon  acquire  exclusive  jurisdiction  over  nearly 
the  entire  business  of  the  country;  but  the  far- 
reaching  effects  of  the  exercise  of  such  powers  by 
Congress,  and  its  destructive  influence  upon  the 
right  of  self-government,  which  was  originally 
possessed  by  the  several  states  and  afterwards 
reserved  to  them  by  the  Constitution  of  the  United 
States,  have  been  so  forcibly  set  forth  by  the  Su- 
preme Court  in  relation  to  the  extension  of  the 
power  of  Congress  to  regulate  commerce  among  the 
states,  as  shown  by  the  extracts  from  the  opinion 
of  Chief  Justice  Fuller  presented  in  a  preceding 
chapter, — that  it  is  unnecessary  to  say  anything 
further  upon  that  point,  except  to  remark  that  the 
tendency  toward  monopoly  is  almost  as  prevalent 
among  business  corporations  as  is  their  use  of  inter- 
state commerce,  and  that  it  is  therefore  apparent 
that  the  same  reasoning  will  apply  with  equal 
force  to  this  class  of  cases. 

It  is  true  that  in  the  case  of  the  United  States 
versus  The  E.  C.  Knight  Company,  the  Court  re- 
ferred directly  to  the  extension  of  the  powers  of 
Congress  by  construction,  whereas  in  the  case  in 
•question,  it  is  proposed  to  extend  them  by  amend- 
ing the  Constitution,  and  that,  in  so  far  as  the 
power  to  act  is  concerned,  the  cases  are  entirely 
different ;  but  the  Court,  in  rendering  its  decision, 
Tvent  further  than  merely  to  determine  the  ques- 
tion of  its  power  to  extend  the  jurisdiction  of  Con- 
gress, and  announced  the  principles  upon  whicli 
the  power  to  regulate  commerce  was  granted  to 
Oongress,  and  the  reasons  which  led  to  the  reserva- 
tion to  the  several  states  of  the  power  to  regulate 
domestic  commerce,  manufacture  and  the  like,  and 


286  Combinations, 

which  require  it  to  be  still  retained  by  them.  So 
far  as  the  principle  and  reasons  which  led  to  this 
distribution  of  powers  are  concerned,  the  cases  are 
precisely  alike. 

The  power  of  the  people  to  amend  the  Constitu- 
tion of  the  United  States  so  as  to  grant  to,  or  with- 
hold from.  Congress,  or  from  the  several  states, 
whatever  powers  they  may  desire  to  extend  or  with- 
hold, cannot  be  denied ;  but  the  wisdom  of  exercis- 
ing that  power  too  freely  may  be  very  seriously 
questioned  and  it  would  seem  that  the  same  rea- 
sons which  led  the  Supreme  Court  of  the  United 
States,  in  the  Knight  case,  to  refuse  to  even  enter- 
tain the  thought  of  allowing  Congress  to  invade 
the  fundamental  right  of  the  states  to  self-govern- 
ment in  local  affairs,  even  though  a  temporary 
benefit  might  be  obtained  thereby,  should  be  suffi- 
cient to  induce  the  people  to  refuse  to  grant  these 
same  powers  in  any  other  way. 
^  Mr.  William  J.  Bryan  has  proposed  the  following 
remedy  for  regulation  of  trusts:  "Every  corpora- 
tion doing  business  outside  of  the  state  of  its  cre- 
ation shall  obtain  a  license  from  the  national  gov- 
ernment which  shall,  first,  prevent  watering  of 
stock;  second,  prevent  monopoly;  third,  require 
publicity  as  to  all  its  transactions,  else  that  license 
shall  be  revoked." 

The  adoption  of  these  provisions  would  also  re- 
quire an  amendment  to  the  Constitution  of  the 
United  States,  which  would  be  subject  to  the  same 
objection  as  the  one  which  we  have  just  considered. 
Nearly  all  corporations  of  any  considerable  size  do 
more  or  less  business  outside  of  the  state  of  their 
creation,   and   would,   therefore,   fall    within   the 


Trusts  and  Monopolies.  287 

provision  of  such  an  extension  of  the  powers  of  Con- 
gress; and  the  power  to  prevent  monopoly  is  es- 
sentially the  same,  and  would  be  quite  as  far- 
reaching  in  its  effects  as  the  powers  proposed  by  the 
Eay  amend nient. 

The  magnitude  of  the  interests  which  are  thus 
sought  to  be  taken  from  the  jurisdiction  of  the  states 
and  placed  under  the  immediate  control  of  Con- 
gress, will  perhaps  be  more  fully  appreciated  when 
it  is  remembered  that  fifty-nine  and  five-tenths  per 
cent,  of  the  total  amount  of  products  manufactured 
in  this  country  during  the  year  1900,  as  shown 
by  the  Twelfth  Census,  was  produced  by  corpora- 
tions. 

In  attempting  to  give  Congress  control  of  these 
corporations  which  seek  to  become  monopolists,  it  is 
exceedingly  difficult  to  tell  where  to  draw  the  line 
between  the  good  and  the  bad,  and  this  is  the  bul- 
wark of  the  modern  combinations.  They  have  as- 
sumed the  same  form  of  organization  as  that  of  the 
smallest  business  corporation,  and  it  is  almost  im- 
possible to  make  laws  which  will  apply  to  one  and 
not  to  all.  If  the  capital  stock  were  to  be  adopted 
as  the  means  of  classification,  it  would  be  very  dif- 
ficult to  say  whether  the  line  of  distinction  should 
be  drawn  at  one  hundred  thousand,  at  one  million, 
at  ten  millions,  or  at  one  hundred  million  dollars, 
and  it  would  seem  to  be  equally  difficult  to  classify 
them  no  matter  what  standard  of  comparison  may 
be  adopted  for  the  purpose. 

The  extreme  difficulty  of  framing  an  amendment 
to  the  Constitution  of  the  United  States,  for  the 
purpose  of  granting  these  powers  to  Congress,  arises 
from  the  necessity  of  defining  a  power  which  will 


288  Combinations, 

be  sufficiently  comprehensive  to  enable  Congress  to 
reach  the  evils  sought  to  be  remedied,  but  yet, 
not  so  broad  as  to  admit  of  any  extension  of  the 
power  beyond  the  purpose  sought  to  be  accom- 
plished, or  to  any  unnecessary  invasion  of  the  sover- 
eign rights  of  the  states.  Judging  from  the  zealous 
care  with  which  the  Original  thirteen  states  guarded 
their  reserved  powers  at  the  time  of  the  making  of 
the  Constitution  of  the  United  States,  and  from 
the  strong  love  of  local  self-government  which  so 
generally  animates  the  people  of  the  numerous 
states  which  have  become  members  of  the  Union, 
since  that  time,  as  well  as  from  the  very  con- 
flicting views  entertained  by  the  people  of  the  vari- 
ous states  as  to  the  manner  in  which  these  corpora- 
tions would  be  dealt  with ;  and  in  view  of  the  sig- 
nificant fact  that  of  the  fifteen  amendments  which 
have  been  made  to  the  Constitution  of  the  United 
States  since  the  time  of  its  adoption,  not  one  has 
conferred  any  additional  powers  upon  Congress, 
and  of  the  further  fact  that,  with  the  exception  of 
the  last  three  amendments  which  were  adopted  dur- 
ing the  pressure  of  the  circumstances  arising  out 
of  the  civil  war,  it  lacks  but  a  little  more  than  one 
of  being  a  hundred  years  since  the  last  amend- 
ment of  any  kind  was  made  to  the  Constitution: 
it  seems  improbable  that  any  amendment  to  the 
Constitution  of  the  United  States  making  any  ex- 
tensive grants  of  power  to  Congress  in  this  direc- 
tion, will  be  ratified  by  the  legislatures  of  three- 
fourths  of  the  states  within  the  very  near  future. 
Nearly  all  of  the  corporations  which  are  doing 
business  in  this  country,  with  the  exception  of  those 
which  serve  in  some  way  to  discharge  a  particular 


Trusts  and  Monopolies.  289 

function  of  the  national  government,  as  the  national 
banks,  etc.,  and  a  few  foreign  corporations  organ- 
ized in  Great  Britain  and  elsewhere,  are  created 
b}^  the  legislatures  of  the  several  states.  They  are 
subject  to  the  jurisdiction  of  the  state  which  cre- 
ated them  and  are  amenable  to  its  laws ;  they  have 
no  legal  existence  beyond  its  limits,  and  that  state 
has  almost  absolute  power  to  control  and  regulate 
their  affairs. 

It  appears,  therefore,  that  the  state  is  the  proper 
authority  to  exercise  this  power  of  supervision  and 
inspection  over  the  affairs  of  corporations  in  order 
to  obtain  the  information  which  we  are  seeking  to 
secure.  Chief  Justice  Fuller,  speaking  on  this 
point  for  the  Supreme  Court  of  the  United  States 
in  the  E.  C.  Knight  Company  case,  says:  "It 
cannot  be  denied  that  the  power  of  a  state  to  pro- 
tect the  lives,  health  and  property  of  its  citizens, 
and  to  preserve  good  order  and  the  public  morals, 
*the  power  to  govern  men  and  things  within  the 
limits  of  its  dominion,'  is  a  power  originally  and 
always  belonging  to  the  states,  not  surrendered  by 
them  to  the  general  government,  nor  directly  re- 
strained by  the  Constitution  of  the  United  States 
and  essentially  exclusive.  The  relief  of  the  citi- 
zens of  each  state  from  the  burden  of  monopoly  and 
the  evils  resulting  from  the  restraint  of  trade  among 
such  citizens,  was  left  with  the  sta!^  to  deal  with 
and  this  court  has  recognized  their  possession  of 
that  power  even  to  the  extent  of  holding  that  an 
employment  of  business  carried  on  by  private  in- 
dividuals, when  it  becomes  a  matter  of  such  public 
interest  and  importance  as  to  create  a  common 
charge  or  burden  upon  the  citizen ;  in  other  words. 


290  Combinations, 

when  it  becomes  a  practical  monopoly,  to  which  the 
citizen  is  compelled  to  resort  and  bv  means  of 
which  a  tribute  can  be  exacted  from  the  commu- 
nity, is  subject  to  regulation  by  state  legislative 
power." 

It  should  be  borne  in  mind  that  the  purpose 
of  tlie  public  supervision  which  it  is  proposed 
to  establish  over  the  affairs  of  corporations,  is  to 
secure  the  necessary  information  to  enable  the 
state  to  deal  intelligently  with  them.  The  affairs 
of  the  public  are  open  to  the  inspection  of  every 
one;  the  motive  and  end  of  every  act  of  the  legis- 
lature are  more  fully  understood  by  the  officials 
of  corporations  than  they  are  by  the  majority  of 
business  men,  while  the  public  knows  practically 
nothing  of  the  affairs  of  corporations  save  what 
their  officials  choose  to  disclose. 

The  creation  of  a  corporation  is  merely  a  busi- 
ness transaction  between  incorporators  on  the  one 
side,  and  the  public  on  the  other.  A  set  of  incor- 
porators apply  to  the  state  legislature  for  the  priv- 
ilege of  carrying  on  a  given  business  in  the  name 
of  an  association,  to  be  relieved  from  individual 
liability  for  the  debts  and  responsibilities  incurred 
in  the  business ;  to  be  allowed  to  sue  in  the  courts ; 
and  to  receive  the  full  protection  and  benefit  of  the 
laws  of  the  state  to  the  same  extent  as  natural 
persons;  to  be  empowered  to  hold  real  and  per- 
sonal property,  and  to  dispose  of  the  same  at  will; 
and  to  be  allowed  to  issue  stocks,  bonds  and  other 
securities,  in  forms  which  are  popularly  supposed 
to  be  safeguarded  by  legislative  provisions,  and 
.which  therefore  sell  readily  among  the  people.    A 


Trusts  and  Monopolies.  291 

charter  is  granted  conferring  those  powers,  and  the 
association  is  said  to  be  incorporated. 

In  return  for  this  grant  of  powers,  the  corpora- 
tion is  presumed  to  render  some  service  to  the  pub- 
lic by  way  of  compensation,  else  why  were  these 
extraordinary  privileges  granted?  This  service 
may  be  rendered  in  the  form  of  a  direct  accommo- 
dation to  the  public,  as  in  the  case  of  railroads 
and  the  like ;  or  it  may  be  in  conducting  manufac- 
ture or  trade  on  a  large  scale,  which  may  be  ex- 
pected to  result  in  better  goods,  or  lower  prices 
to  the  people;  but  in  whatever  way  the  service 
may  be  rendered,  the  acknowledgment  that  it  is 
due,  implies  the  right  of  the  community  to  take 
the  necessary  precautions  to  see  that  it  is  receiv- 
ing the  full  amount  to  which  it  is  entitled. 

Again,  all  the  powers  that  are  granted  to  corpo- 
rations are  granted  under  the  presumption  that 
they  will  be  exercised  subject  to  certain  safeguards 
and  restrictions,  and  if  there  is  no  means  pro- 
vided by  which  the  state  may  at  all  times  know 
whether  these  requirements  are  being  complied 
with  or  not,  the  legislature  has  failed  to  discharge 
the  trust  imposed  in  it,  and  the  state,  therefore, 
cannot  perform  its  full  duty  to  the  people. 

Under  the  present  system,  after  a  corporation 
has  been  doing  business  for  a  time,  it  returns  to 
the  legislature  and  asks  for  an  extension  of  its 
powers;  but  the  legislature  has  known  practically 
nothing  of  the  company  since  the  date  of  its  in- 
corporation and  can  learn  nothing  now  except  such 
matters  as  its  officials  are  willing  to  disclose.  The 
public  and  the  members  of  the  legislature  know 
well  that  the  corporation  is  actuated  by  selfish  mo- 


292  Combinations, 

tives,  and  that  its  statement  of  its  case  cannot, 
therefore,  be  accepted  as  an  impartial  statement 
of  facts  upon  which  legislative  action  may  be 
founded.  The  legislature,  therefore,  finds  itself 
obliged  to  act  in  the  dark,  not  knowing  the  real 
conditions,  and  feeling  satisfied  that  if  it  grants 
what  the  corporation  asks,  it  will  be  allowing  too 
much,  it  usually  prefers  to  take  no  action,  even 
though  it  may  be  convinced  that  some  concession 
of  power  might  be  beneficial  both  to  the  corpora- 
tion and  to  the  public. 

The  result  of  this  mutual  mistrust  is  a  continual 
contest  between  the  corporations  and  the  people, 
which  engages  the  attention  of  nearly  every  legis- 
lative assembly  in  the  country.  So  it  would  seem 
to  be  clear  that  fair  and  upright,  frank  and  open 
dealing  would,  in  the  end,  prove  to  be  most  profita- 
ble for  both  sides. 

We  have  spoken  of  individual  corporations  as 
applying  directly  to  the  legislature  for  their  corpor- 
ate powers,  for  this  is  in  effect  what  they  still  do, 
and  what  they  all  had  to  do  in  fact,  originally ;  and 
the  taking  of  an  individual  company  serves  better 
to  illustrate  the  principle,  and  more  directly  ex- 
presses the  relations  of  the  parties.  The  general 
incorporation  laws  which  have  been  enacted  in 
most  of  the  states,  are  merely  a  means  of  facilita- 
ting the  granting  of  charters,  and  do  not  alter  the 
situation  in  the  least;  the  principle  is  the  same 
whether  a  charter  be  granted  directly  to  an  indi- 
vidual corporations,  or  to  a  number  of  them  which 
fall  within  a  prescribed  class.  The  extension  of 
their  powers  is  also  now  made  by  amendments  to 
the  general  corporation  laws,  and  the  endeavor  to 


Trusts  and  Monopolies.         293 

so  frame  these  amendments  as  to  meet  the  de- 
mands of  the  various  kinds  of  corporations  em- 
braced within  a  given  class,  makes  this  task  a 
most  difficult  undertaking. 

Let  us  now  examine  some  of  the  objections  which 
are  likely  to  be  urged  against  the  establishment  of 
public  supervision  of  corporations.  It  is  said  in 
the  first  place  that  their  business  is  of  a  private 
character  and  that  the  public  has,  therefore,  no 
right  to  interfere  with  it ;  but,  as  we  have  already 
seen,  these  corporations  have  not  only  been  created 
by  the  public,  but  have  also  been  granted  special 
powers  and  privileges,  and  justice  demands  that 
wherever  a  grant  is  made,  whether  it  be  by  an  in- 
dividual or  by  a  state,  there  shall  be  some  com- 
pensation made  in  return.  These  corporations  do 
not  make  any  specific  payment  in  return  for  the 
corporate  powers  which  they  receive,  and  since  the 
state  cannot  be  presumed  to  give  away  valuable 
privileges  merely  as  a  matter  of  charity,  it  follows 
that  the  compensation  must  be  paid  in  the  form  of 
improved  service  of  some  kind,  and  it  devolves  upon 
the  state  to  exact  its  full  share  of  such  service 
from  them.  The  state  has  relieved  their  stock- 
holders from  individual  liability  for  their  corpor- 
ate debts,  and  it  should  therefore  see  that  their 
creditors  are  protected;  it  has  authorized  them  to 
issue  bonds  and  other  securities  and  it  owes  it  as  a 
duty  to  the  purchasing  public  to  see  that  these  se- 
curities are  issued  only  under  proper  safeguards 
and  against  sufficient  assets ;  and  how  can  the  state 
perform  those  duties  without  an  intimate  knowl- 
edge of  the  affairs  of  these  corporations  ? 

Many  small  companies  are  organized  merely  for 


294  Combinations, 

the  purpose  of  enabling  some  irresponsible  indi- 
vidual to  carry  on  business  under  the  name  of  a 
corporation  with  a  view  of  securing  greater  credit 
thereby.  The  wives  and  sisters  of  these  persons 
join  with  them  for  the  purpose  of  obtaining  a 
charter,  but  the  business  continues  to  be  con- 
ducted as  the  private  property  of  the  individual 
proprietor  and  the  corporation  exists  merely  ia 
name.  This  class  of  corporations  would  object  to 
publicity,  but  an  exposure  of  their  affairs  would 
be  greatly  to  the  benefit  of  their  creditors,  and  of 
the  public  at  large. 

Another  class  of  corporations  object  to  publicity 
because  they  fear  the  exposure  of  the  discrimina- 
tion of  prices  which  they  make  to  customers,  and 
discriminating  rates  which  they  receive  from 
others,  and  often,  also,  because  of  secret  agree- 
ments as  to  prices,  etc.,  which  exist  between  con- 
cerns engaged  in  the  same  business ;  but  these  are 
all  acknowledged  evils  which  it  is  to  the  interest 
of  the  public  to  eradicate.  The  national  govern- 
ment has  established  a  commission  known  as  the 
Interstate  Commerce  Commission  for  the  express 
purpose  of  preventing  similar  abuses  among  rail- 
road companies,  and  why  should  not  the  public  be 
protected  from  being  wronged  in  the  same  way  by 
manufacturing  and  other  corporations? 

Nearly  all  large  corporations  also  place  their 
stock  on  the  market  for  sale,  and  invite  the  people 
to  invest  their  money  in  it.  Whatever  the  public 
is  asked  to  purchase,  it  has  a  perfect  right  to  ex- 
amine, and  to  inquire  into  every  particular  which 
enters  into  its  value.  The  operations  of  the  com- 
pany and  the  properties  held  by  it,  are  the  elements 


Trusts  and  Monopolies.  295 

which  give  value  to  the  stock,  and  the  public,  there- 
fore, has  a  perfect  right  to  inspect  them. 

These  stocks  and  bonds  of  industrial  corpora- 
tions have  already  become  a  most  important  source 
of  investment.  They  are  rapidly  invading  the  po- 
sition once  held  by  real  estate  as  the  only  recog- 
nized safe  investment  for  men  of  small  means,  and 
prudence  and  the  welfare  of  the  nation  demand 
that  the  greatest  care  and  protection  should  be 
thrown  about  them.  The  convenient  form  of  these 
securities  and  the  ease  with  which  they  may  be 
transferred  in  large  or  small  amounts,  make  them 
most  desirable  and  tempting  forms  of  investment, 
and  many  fortunes  have  already  been  lost  by  per- 
sons who  have  yielded  to  the  temptation  to  pur- 
chase without  having  the  means  of  securing  ade- 
quate information  as  to  the  real  value  of  the  prop- 
erties which  the  paper  purported  to  represent. 

What  business  man  would  think  of  loaning  five 
or  ten  thousand  dollars  upon  a  piece  of  real  estate 
without  first  having  an  attorney  examine  as  to  every 
detail  of  the  title,  and  then  inquiring  particularly 
as  to  the  amount  of  rent  or  other  revenue  de- 
rived from  it,  the  taxes  to  be  paid,  the  insurance 
carried,  the  repairs  needed,  etc.,  and  why  should 
a  man  be  required  to  invest  the  same  amount  of 
money  in  the  stock  of  some  industrial  corporation 
with  no  better  assurance  as  to  its  value  than  the 
mere  statement  of  some  stranger  who  may  chance 
to  have  it  for  sale? 

Most  of  these  large  corporations  invite  public 
investigation  of  their  affairs  by  publishing  annual 
statements  of  their  receipts  and  expenditures, 
their  assets  and  liabilities,  and  the  dividends  paid 


296  Combinations, 

upon  their  stock ;  for  the  purpose  of  inducing  the 
public  to  purchase  their  securities.  These  state- 
ments are  given  out  to  the  public  as  true  and  accu- 
rate accounts  of  their  affairs;  yet  these  same 
corporations  are  most  careful  and  most  determined 
in  their  efforts  to  exclude  the  public  from  access 
to  their  books.  A  familiar  instance  of  the  extent 
to  which  these  companies  are  willing  to  go  in  order 
to  prevent  public  inspection  of  their  affairs  is  that 
of  the  Standard  Oil  Trust  which,  when  commanded 
to  bring  its  books  into  court,  burned  a  large  num- 
ber of  them  in  order  to  prevent  their  inspection, 
thus  wilfully  disregarding  the  orders  of  the  court, 
and  risking  the  imprisonment  of  its  officers  rather 
than  expose  accounts  which  it  claimed  to  be  unim- 
portant. 

If  these  published  statements  are  true,  if  all  of 
the  properties  of  the  corporations  are  thus  fully 
shown,  the  receipts  and  expenditures  of  the  busi- 
ness thus  fully  exposed,  and  the  profits  earned  so 
frankly  disclosed;  what  reasonable  objection  can 
there  be  made  to  a  public  inspection  of  the  opera- 
tions by  which  these  results  have  been  obtained  ? 

If,  however,  these  statements  are  merely  the  re- 
sult of  a  peculiar  system  of  corporation  book- 
keeping; if  miscellaneous  expenses,  salaries,  and 
other  accounts  have  been  raised  or  lowered  or  so 
manipulated  as  to  produce  large  dividends  when  it 
is  the  purpose  to  attract  purchasers  to  the  stock ;  or 
small  dividends,  when  it  is  sought  to  ward  off  pub- 
lic inquiry  or  to  avoid  taxation ;  then  these  state- 
ments are  given  out  clearly  for  the  purpose  of  de- 
frauding the  public,  and  furnish  an  additional  rea- 


Trusts  and  Monopolies.         297 

gon  why  the  state  should  exercise  a  close  super- 
vision over  their  affairs. 

Another  objection  made  to  public  inspection  of 
the  affairs  of  corporations  is  the  fear  of  exposing 
trade  secrets.  These  are  merely  private  means  of 
manufacturing  or  producing  certain  articles,  such 
as  are  usually  protected  by  patents,  but  which  some 
persons  prefer  to  preserve  by  maintaining  strict 
secrecy  among  all  those  concerned  in  the  process 
of  their  production. 

The  public  is  directly  interested  in  every  new 
invention  or  discovery  in  science  or  the  arts,  which 
either  serves  any  useful  purpose  or  adds  to  the 
general  store  of  knowledge,  and  it  has  a  right  to 
secure  to  the  people  the  benefits  arising  from  their 
application,  and  to  take  all  necessary  precautions 
to  prevent  them  from  being  lost  through  the  death 
of  their  inventors  or  discoverers,  or  those  to  whom 
the  secrets  may  have  been  imparted.  The  Govern- 
ment of  the  United  States,  as  well  as  all  other 
civilized  nations,  has  exercised  this  right  by  the 
adoption  of  patent  laws,  which  secure  to  every  in- 
ventor or  discoverer  the  exclusive  and  absolute  con- 
trol of  his  invention  or  discovery  for  a  definite 
number  of  years,  during  which  time  he  may  use  it 
freely  and  openly  without  fear  of  interference  with 
his  rights  by  any  one,  and  affords  him  the  means 
of  obtaining  full  redress  in  the  courts  for  any  in- 
fringement or  invasion  of  them;  but  after  the  ex- 
piration of  the  period  for  which  the  patent  is 
granted,  the  invention  or  discovery  becomes  public 
property  and  any  one  may  manufacture,  use  or 
vend  it  at  pleasure. 

This  government  has  never  exercised  the  right  to 


298  Combinations, 

compel  inventors,  discoverers  or  authors  to  bring 
their  works  within  the  protection  of  the  laws  made 
for  that  purpose,  though  it  is  claimed  by  many  that 
the  public  has  an  absolute  right  in  every  new  in- 
vention or  discovery,  even  as  against  the  inventor 
or  discoverer  himself,  on  the  principle  that  it  is  not 
merely  the  genius  or  skill  of  the  individual  which 
has  enabled  him  to  attain  such  results,  but  that  it 
is  the  combined  knowledge  and  experience  of  the 
whole  community  which  have  educated  him  up  to 
that  point  of  etticiency,  which  have  produced  the 
conditions  and  surroundings  which  have  made  his 
achievement  possible,  and  which  have  placed  him 
in  the  position  to  se?  that  which  he  is  said  to 
have  discovered.  But  we  are  now  considering  the 
relations  of  corporations  to  the  government,  and 
not  the  relations  of  the  individual  to  the  commu- 
nity, and  we  shall,  therefore,  notice  this  right  of 
the  individual  to  the  exclusive  use  of  his  invention, 
only  in  so  far  as  he  calls  upop  the  government  to 
assist  Iiim  in  the  exercise  of  it. 

Some  writers  have  found  much  difficulty  in  en- 
deavoring to  apply  public  inspection  to  the  affairs 
of  corporations  without  exposing  these  trade  se- 
crets, the  right  to  which  they  admit,  but  we  hold 
that  any  man  who  is  unwilling  to  trust  his  inven- 
tion to  the  protection  of  the  laws  which  the  people 
have  made  for  his  benefit,  is  unworthy  of  citizen- 
ship in  the  government  under  which  he  lives,  and 
should  not  be  afforded  the  assistance  of  the  cor- 
poration laws  to  enable  him  and  his  associates  to 
preserve  in  secrecy  that  which  it  is  the  policy 
of  all  governments  to  make  public  at  the  earliest 


Trusts  and  Monopolies.  299 

possible  moment  consistent  with  due  compensation 
to  the  inventor. 

If  our  patent  laws  do  not  afford  adequate  pro- 
tection to  inventors,  they  can  be  amended;  but  no 
pains  should  be  taken  to  enable  inventors  to  be- 
come patent  laws  unto  themselves,  and  the  fear  of 
exposing  this  class  of  secrets  should  constitute  no 
obstacle  to  the  immediate  application  of  state  su- 
pervision to  the  affairs  of  corporations. 

The  importance  of  the  subject  of  trade  secrets 
has  greatly  diminished  in  recent  years,  and  the 
practice  of  preserving  them  is  rapidly  falling  into 
disuse.  In  nearly  all  of  our  important  industries, 
those  interested  in  the  same  line  of  business 
may  readily  obtain  leave  to  visit  and  inspect 
each  other's  plants,  and  it  is  customary  to 
exchange  such  visits  both  with  the  producers  of  this 
country  and  of  foreign  nations. 

The  necessity  for  public  inspection  of  the  affairs 
of  the  very  large  and  the  very  small  corporations 
being  thus  apparent,  what  reason  is  there  in  princi- 
ple why  the  same  inspection  should  not  also  be  ap- 
plied to  those  of  medium  size?  If  they  have  not 
worked  as  much  injury  or  fraud  upon  the  public, 
it  has  in  many  instances  been  simply  because  they 
have  not  been  able  to  attract  the  same  amount  of 
attention  to  their  affairs  or  confidence  in  their  pa- 
per, and  in  all  cases  a  systematic  supervision  of 
the  conduct  of  their  business  will  serve  in  many 
ways  to  keep  them  from  falling  into  evil  prac- 
tices. In  respect  to  those  corporations  which  are  im- 
properly managed,  an  exposure  of  their  methods 
would  be  a  direct  benefit  to  the  people ;  while  with 
those  which  are  conducted  in  a  straight  business- 


300  Combinations, 

like  manner,  it  would  serve  to  strengthen  public 
confidence,  thus  benefiting  the  corporations;  and 
it  does  not  appear  likely  that  publicity  would 
prove  to  be  at  all  injurious  to  those  whose  methods 
are  fair  and  whose  purposes  are  honest. 

By  state  supervision  and  inspection  of  the  affairs 
of  corporations,  all  the  abuses  which  it  is  the  pur- 
pose of  the  Interstate  Commerce  Commission  to 
remedy  among  railroad  companies,  can  be  pre- 
vented in  manufacturing  and  business  corporations, 
for  the  state  possesses  complete  control  over  them  ; 
and  when  their  misconduct  shall  have  been  brought 
"to  the  light,  it  has  full  power  to  deal  with  them  and 
to  impose  such  regulations  as  it  may  find  necessary. 

Most  of  the  evils  to  which  we  have  referred  in 
the  preceding  pages,  would  cease  to  be  practiced 
merely  because  of  the  exposure  of  them,  the  temp- 
tations and  opportunities  for  dishonest  practices 
"which  secrecy  of  action  affords  would  be  removed, 
the  provisions  of  the  present  corporation  laws  could 
then  be  practically  enforced,  honesty  and  fair  deal- 
ing would  be  encouraged,  and  the  necessary  in- 
formation to  enable  the  state  to  enact  such  new 
laws  and  regulations  as  the  situation  might  re- 
quire, would  always  be  at  hand. 

Many  restrictions  and  penalties  are  now  im- 
posed upon  corporations  for  the  purpose  of  pre- 
venting some  of  the  more  familiar  evils  to  which 
the  public  have  been  subjected,  such  as  the  issuing 
of  false  statements  or  reports ;  the  payment  of  un- 
earned dividends,  the  incurring  of  excessive  in- 
debtedness and  the  like.  But  how  can  these  pro- 
visions be  enforced  so  long  as  the  state  has  no  means 
of  knowing  the  true  condition  of  the  affairs  of  the 


Trusts  and  Monopolies.         3011 

corporation,  what  its  earnings  really  have  been, 
or  what  are  its  true  assets  and  liabilities?  Of 
what  value  is  the  sworn  statement  or  report  of  an 
agent  or  officer  of  a  corporation,  so  long  as  the 
state  has  no  means  of  learning  whether  it  is  true 
or  false? 

A  large  part  of  the  objection  to  state  super- 
vision of  corporations,  and  of  the  hesitancy  on  the 
part  of  legislative  bodies  to  adopt  it,  arises  from 
the  popular  feeling  that  the  various  kinds  of  busi- 
ness in  which  they  are  engaged  have  always  been 
regarded  as  the  subject  of  strictly  private  affairs. 
It  is  true  that  these  industries  have  been  and  still 
are  looked  upon  as  belonging  peculiarly  to  the 
sphere  of  private  enterprise  so  long  as  they  con- 
tinue to  be  the  property  of  individuals  and  remain 
subject  to  personal  supervision  and  management; 
but  when  they  come  to  demand  more  powerful 
forms  of  organization  to  conduct  them,  it  is  an  ac- 
knowledgment that  they  have  outgrown  the  capac- 
ity of  individual  control.  This  new  form  of  or- 
ganization demanded  must  possess  extraordi- 
nary powers  and  privileges;  it  must  be  more 
powerful  than  individuals;  it  cannot  be  created 
by  those  persons  who  desire  to  employ  it;  it  must 
come  from  the  supreme  power  in  the  land  which  is 
the  government.  The  government  is  established 
for  the  equal  benefit  of  all  its  citizens  and  cannot, 
therefore,  be  presumed  to  grant  special  powers  and 
privileges  to  any  set  of  incorporators  merely  for 
the  private  benefit  of  the  few  individuals  who  are 
directly  interested  in  the  corporation.  It  follows, 
therefore,  that  whenever  a  corporation  is  created, 
no  matter  for  what  purpose  it  may  be,  there  are 


302  Combinations, 

certain  rights  reserved  to  the  government  for  the 
benefit  of  the  whole  people,  from  whom,  in  theory, 
these  special  powers  have  been  drawn,  and  the  duty 
of  preserving  these  rights  rests  with  the  govern- 
ment. The  state,  it  is  true,  has  in  most  instances 
neglected  to  insist  upon  the  supervision  necessary 
to  preserve  its  rights  in  the  management  of  corpor- 
ate affairs,  and  the  long  disuse  of  the  authority  to 
exercise  such  supervision  has  led  most  of  us,  includ- 
ing the  corporations,  to  forget  that  it  ever  existed  ; 
but  the  right  still  exists;  the  power  to  enforce 
it  remains  in  the  state,  and  immediate  steps  should 
be  taken  to  exercise  it  without  further  delay. 

This  right  of  privacy  which  is  claimed  by  corpo- 
rations, also  applied  with  equal  force  to  the  busi- 
ness of  banking  until  within  the  last  thirty  or  forty 
years;  but  since  the  establishment  of  the  national 
banking  system  by  the  Government  of  the  United 
States,  it  has  maintained  a  strict  supervision  and 
inspection  over  the  affairs  of  all  banks  organized 
under  its  laws.  This  has  not  in  any  way  inter- 
fered with  the  successful  management  of  these 
banks;  no  one  has  complained  of  the  exposure  of 
private  business  methods  or  of  the  intermeddling 
of  competing  concerns;  the  rights  of  the  public 
have  been  preserved ;  yet  the  business  has  proved 
highly  profitable  to  the  members  of  these  corpora- 
tions. No  one  has  been  driven  from  the  business 
because  of  this  public  supervision  to  which  their 
private  affairs  have  been  subjected,  but  on  the  con- 
trary, the  number  of  these  national  banks  has  con- 
stantly increased  until  they  have  very  generally 
supplanted  the  state  banks ;  and  if  the  rate  of  their 
increase  has  diminished  during  the  last  few  years. 


Trusts  and  Monopolies.         303 

it  has  been  because  of  the  tendency  to  merge  the 
smaller  ones  into  larger  and  more  powerful  insti- 
tutions, and  not  because  of  any  dissatisfaction  with 
the  system  under  which  the  business  is  conducted. 
We  have  all  become  accustomed  to  the  exercise  of 
public  supervision  over  national  banks,  and  since 
it  has  proved  so  successful  with  this  class  of  cor- 
porations, why  can  it  not,  with  equal  justice  and 
success,  be  applied  to  those  engaged  in  manufactur- 
ing or  in  general  business? 

The  United  States  Government  has  established 
the  Interstate  Commerce  Commission  for  the  pur- 
pose of  exercising  supervision  and  a  large  degree 
of  control  over  the  affairs  of  railroad  companies. 
Many  of  the  states  have  also  established  more  or 
less  thorough  systems  of  inspection  of  the  affairs  of 
companies  engaged  in  the  operation  of  railroads, 
warehouses,  etc.,  a  certain  degree  of  supervision 
is  exercised  over  factories,  tenement  houses  and  the 
like,  whether  they  are  operated  or  controlled  by 
corporations  or  by  private  individuals,  and  all  are 
familiar  with  the  exercise  of  public  inspection  over 
the  sale  of  milk,  meat  and  various  kinds  of  food,  of 
gas,  oil  and  various  commodities,  so  there  is  noth- 
ing new  or  revolutionary  in  the  proposition  to  make 
this  supervision  more  thorough  and  general  in  its 
application. 

By  public  supervision  and  inspection  of  the  af- 
fairs of  corporations,  it  is  not  meant  that  their 
books  shall  be  kept  open  for  the  accommodation  of 
every  curiosity  seeker  who  may  chance  to  come 
that  way.  It  is  intended  that  they  shall  be  open 
to  the  inspection  of  regularly  constituted  state 
officers  appointed  for  the  purpose,  who  shall  at  all 


304  Combinations, 

times  have  access  to  them;  who  shall  have  power 
,  to  require  them  to  be  kept  in  accordance  with  some 
'  established  system  of  bookkeeping  in  order  to  show 
the  true  condition  of  the  business;  who  shall 
promptly  report  all  violations  of  the  law  to  the 
proper  officers  whose  duty  it  shall  be  to  institute 
immediate  proceedings  against  the  offenders.  A 
report  should  also  be  required  to  be  made  at  stated 
periods  to  the  governor  of  the  state,  showing  the 
standing  and  general  condition,  together  with  such 
pariculars  as  the  law  may  require,  of  every  corpora- 
tion doing  business  in  the  state.  This  is  substan- 
tially the  same  as  the  reports  that  are  now  made 
by  the  bank  examiners  to  the  proper  officials  on  the 
'  condition  of  the  national  banks,  and  of  the  build- 
ing and  loan  associations  by  the  various  state  au- 
ditors. 

The  mere  exposure  of  the  acts  of  corporations 
to  the  public  gaze,  would  in  itself  be  sufficient  to 
cure  many  of  the  evils  which  have  made  large  cor- 
porations so  odious  to  the  public,  just  as  the  light 
of  the  sun  is  sufficient  to  kill  many  germs  of  dis- 
ease in  the  human  body,  even  the  deadly  microbes 
which  we  are  told  infest  the  water  we  drink,  the 
food  we  eat,  and  the  air  we  breathe,  being  rendered 
harmless  if  exposed  to  its  full  rays  for  only  a  few 
moments;  but  public  inspection  of  corporations 
should  be  coupled  with  tlie  power  to  remedy  evils 
when  they  are  discovered,  and  we  believe  that  the 
light  that  may  be  obtained  from  a  close  inspection 
of  their  affairs,  will  furnish  a  truer  guide  to  a 
fair  and  amicable  adjustment  of  the  relations  be- 
tween the  corporations  and  the  public  than  any 


Trusts  and  Monopolies.         305 

system  that  can  be  devised  from  the  study  of  their 
mere  external  relations  and  appearances. 

What  is  called  watering  of  stock  is  one  of  the 
evil  practices  most  commonly  complained  of  in. 
connection  with  corporations.  By  watering  of  stock 
is  meant  the  issuing  of  certificates  of  stock,  for 
which  no  money  or  other  property  has  been  paid, 
and  which,  therefore,  represents  no  increase 
in  the  value  of  the  company's  property.  la 
other  words,  a  company  doing  business  oni 
a  capital  of  fifty  thousand  dollars,  all  of 
which  has  been  paid  in  and  regularly  invested, 
has  earned  a  sufficient  amount  of  profit  during; 
the  year  to  pay  a  dividend  of  ten  or  twelve 
per  cent.;  but  its  directors,  fearing  that  the  pay- 
ment of  so  large  a  dividend  might  attract  public 
criticism,  and  perhaps  inquiry  into  the  business, 
resolve  to  increase  the  capital  stock  to  one  hundred 
thousand  dollars,  and  this  is  done  by  merely  adopt- 
ing a  resolution  to  that  effect,  filing  the  necessary 
papers  with  the  state  officers  and  issuing  the  stock 
certificates.  The  same  profits  are  then  distributed 
at  the  rate  of  five  or  six  per  cent,  upon  the  in- 
creased capital,  ^d  the  business  is  said  to  be  only 
fairly  profitable.AThere  has  not  been  a  dollar  added 
to  the  assets  of  me  company  to  support  this  extra 
fifty  thousand  dollars  worth  of  stock  which  has  been 
issued,  but  the  public  has  no  means  of  knowing 
this,  and  it  is  put  upon  the  market  for  sale  in  pre- 
cisely the  same  manner  as  the  original  stock  has 
been  offered,  and  just  as  though  it  represented  an 
actual  investment  of  capital  to  the  amount  of  the 
full  face  value  of  the  stock,  while  in  truth  it 
merely  represents  an  investment  of  only  one-hlf 


3o6  Combinations, 

of  that  value.  This  stock  is  sold  on  the  market  for 
as  high  a  price  as  the  public  can  be  induced  to  pay 
for  it,  and  the  inside  operators  are  thus  frequently 
enabled  to  reap  large  profits  from  purchasers  who 
have  not  learned  of  the  recent  inflation  of  the  stock 
in  which  they  are  investing. 

This  practice  of  issuing  new  stock  for  the  pur- 
pose of  reducing  the  rate  of  dividends  to  be  paid,  is 
sometimes  spoken  of  as  the  issuing  of  stock  against 
the  earning  power  of  the  corporation.  This  method 
of  capitalization  is  justified  by  some  economists, 
and  aside  from  the  deception  practiced  upon  the 
public,  and  the  powerful  influence  which  it  exerts 
in  maintaining  fictitiously  high  prices,  it  miglit 
not  be  so  seriously  objectionable  if  the  public  could 
be  guaranteed  that  a  given  rate  of  dividends  could 
be  maintained ;  but  it  looks  very  much  like  a  one- 
sided proposition,  for  while  the  issue  of  stock  is 
increased  when  the  profits  are  large,  it  is  never 
contracted  when  they  diminish,  and  the  stock- 
holder finds  himself  obliged  to  accept  decreasing 
profits  while  he  has  only  half  the  security  for  his 
money  that  the  original  shareholders  held.  Yet 
this  increased  volume  of  stocks  remains  as  the  nomi- 
nal capital  upon  which  dividends  are  expected  to 
be  paid,  and  serves  therefore  to  increase  the  cost  of 
production  and  consequently  to  increase  prices  to 
the  consumers. 

Stocks  are  watered  in  this  way  for  various  pur- 
poses, one  of  which  is  to  avoid  the  appearance  of 
making  excepti<)nally  large  profits,  as  has  just 
been  described;  janother  is  to  reduce  the  value  of 
the  individual  ^ares  of  high  priced  stock  in  the 
hope  of  securing  a  more  ready  sale  for  it  on  the 


Trusts  and  Monopolies.         307 

public  market;  and  a  third  use  of  watered  stock 
is  the  compensation  of  the  promoters  of  these  large 
corporations.  Large  blocks  of  this  stock  are  given 
to  these  promoters,  for  which  nothing  has  been  paid, 
which  represents  no  value  in  the  corporation,  but 
which  they  place  upon  the  market ;  and  they  thus 
proceed  to  collect  from  the  outside  public  millions 
of  dollars  as  compensation  for  their  services  in 
organizing  these  same  combinations  of  capital  which 
the  political  representatives  of  the  people  are  tax- 
ing their  best  ingenuity  to  restrain. 
.  The  most  common  explanation  offered  in  cases  of 
the  consolidation  of  large  concerns,  for  the  issuing 
of  stock  in  excess  of~  the  value  of  their  tangible 
property,  is  that  it  is  to  pay  for  good-will.  A  more 
Convenient  form  of  asset  could  hardly  be  con- 
ceived for  the  purpose,  for  there  is  nothing  less 
susceptible  of  exact  measurement  than  good-will 
in  business.  It  depends  upon  so  many  varying 
conditions;  its  value  is  so  liable  to  be  overesti- 
mated by  those  who  have  it  for  sale,  and  its  very 
existence  is  so  apt  to  be  entirely  imaginary,  that  we 
think  it  should  be  confined  within  very  narrow 
limits  and  given  very  little  consideration  as  an  as- 
set against  which  to  issue  securities,  or  as  a  prin- 
cipal upon  which  dividends  must  be  paid.  We  are 
willing  to  concede  the  claim  to  a  reasonable  amount 
.  of  good-will  in  cases  where  a  reputation  and  de- 
Imand  have  been  created  for  a  particular  article, 
;  or  a  special  brand,  by  means  of  extra  care  in  its 
'  preparation,  by  reason  of  many  years  devoted  to  the 
development  of  the  business,  or  by  means  of  exten- 
sive advertising ;  but  in  the  case  of  staple  articles, 
^in  the  manufacture  of  which  these  large  corpora- 


3o8  Combinations, 

tions  are  chiefly  engaged,  which,  sell  upon  their 
merits,  and  the  demand  for  which  depends  upon 
the  necessities  of  the  people,  there  would  seem  to 
be  but  little  or  no  foundation  for  the  claim  to  good- 
will. More  especially  is  this  true  since  it  is  the 
purpose  of  these  large  combinations  to  create  a 
virtual  monopoly  in  their  products,  and  it  makes 
but  little  difference  whether  they  have  the  good 
or  the  bad  will  of  their  former  customers,  for  they 
must  still  continue  to  buy  from  them  or  go  with- 
out. , 

A  mild  admission  of  the  practice  of  watering 
the  stocks  of  corporation  is  to  be  found  in  the  re- 
plies to  tlie  questions  sent  out  by  the  Department  of 
Labor  of  the  United  States,  and  published  in  the 
Bulletin  of  Labor,  No.  29,  July,  1900,  asking  in- 
dustrial combinations  to  report  as  to  what  percent- 
age the  original  cost  of  their  plants,  the  cost  of 
reproducing  the  plants  actively  employed,  and  their 
working  capital,  bore  to  their  stock  issued,  to  which 
twenty-four  combinations  responded.  Twelve  re- 
ported that  the  original  cost  of  the  plants  entering 
into  the  combinations  was  fifty-five  and  fifty-eight- 
hundredths  per  cent,  of  the  stock  issued  by  them; 
ten  reported  that  the  original  cost  of  the  active 
plants  of  the  combinations  was  fifty-six  and  ninety- 
two-hundredths  per  cent,  of  the  stock  issued;  fif- 
teen reported  that  the  estimated  cost  of  reproduc- 
tion of  plants  of  the  same  capacity  as  those  actively 
engaged  in  manufacturing  was  forty-eight  and 
twelve-hundredths  per  cent,  of  the  capital  stock; 
and  twenty-three  reported  that  their  working  capi- 
tal was  sixteen  and  thirty-hundredths  per  cent, 
of  their  capital  stock.    Thus  it  will  be  seen  that. 


Trusts  and  Monopolies.         309 

taking  the  working  capital  and  the  cost  of  repro- 
duction of  the  active  plants  together,  the  capital 
actually  invested  at  its  cash  value  would  amount  to 
sixty-four  and  forty-two-hundredths  per  cent,  of 
the  nominal  capitalization;  or  if,  in  place  of  the 
cost  of  producing  the  active  plants,  the  original 
cost  of  those  plants  be  substituted,  the  above  per 
cent,  will  be  increased  to  seventy-three  and  twenty* 
two-hundredths. 

A  further  evidence  of  the  extent  to  which  stock 
watering  has  been  carried  by  these  large  combina- 
tions, as  well  as  an  illustration  of  how  little  the 
public  can  really  learn  of  their  affairs  by  merely 
taking  note  of  their  capital  stock,  is  afforded  by 
the  latest  phase  of  combination  management,  which 
is  to  reorganize  by  reducing  their  capital  to  a  small 
percentage  of  what  it  has  been  heretofore,  while 
still  retaining  the  same  properties  and  business  as 
under  the  heavy  capitalization.  Thus,  the  Con- 
tinental Tobacco  Company,  capitalized  at  one 
hundred  million  dollars,  the  American  Tobacco 
Company  at  seventy  million  dollars,  and  the 
Ogdens  Cigarette  Company,  of  England,  at 
one  million  dollars,  were,  in  1901,  merged 
into  the  Consolidated  Tobacco  Company  with 
a  capital  stock  of  only  forty  million,  but 
with  a  funded  indebtedness  of  over  one  hun- 
dred fifty-six  million  dollars.  All  of  the  prop- 
erties owned  by  the  old  combinations  are  now  held 
by  the  Consolidated  Tobacco  Company,  but  its 
capital  stock  is  less  than  twenty-five  per  cent,  of 
the  total  stock  of  the  merging  companies.  The 
Distilling  Company  of  America,  with  a  capital  of 
eighty-five  million  dollars,  was  organized  in  190^ 


3IO  Combinations, 

into  the  Distillers'  Securities  Corporation  with  a 
capital  of  only  thirty-two  million  five  hundred 
thousand  dollars;  and  still  later  the  American 
Steel  Hoop  Company  with  a  capital  oftthirty-three 
million  dollars,  and  the  National  Steel  Company 
with  a  capital  of  fifty-nine  million,  the  Carnegie 
Steel  Company  with  a  capital  of  one  hundred  sixty 
million  dollars,  have  been  merged  into  the  National 
Steel  Company  with  a  capital  of  only  sixty-three 
million  dollars.  In  each  of  these  cases,  the  new 
combination  OAvns  all  of  the  properties  and  conducts 
the  same  business  as  did  its  several  members  be- 
fore they  merged,  and  it  is  worth  just  as  mucli 
under  the  new  capitalization  as  it  was  under  the 
old.  It  is  difficult  to  say  what  is  the  controlling 
motive  in  this  latest  movement  of  combinations, 
but  it  is  probable  that  one  of  the  chief  purposes 
of  the  chanfje  is  to  avoid  the  payment  of  taxes  upon 
their  capital  stock.  It  is  probable,  therefore,  that 
in  the  future  we  shall  not  hear  so  much  of  the  or- 
ganization of  great  combinations  with  enormous 
capitalization,  and  that  we  shall  hear  more  of  the 
formation  of  combinations  which  control  even, 
greater  property  interests,  but  which  have  but  a 
comparatively  small  nominal  stock.  It  is  likely, 
however,  that  the  market  value  of  the  stocks  of 
these  new  combinations  will  soon  approximate  the 
total  values  represented  by  the  stocks  of  the  old. 
concerns,  and  our  revenue  laws  should  be  amended 
so  as  not  to  allow  these  combinations  to  escape 
legitimate  taxation  by  merely  changing  the  form 
of  their  title  deeds. 

It  will  be  perceived,  from  what  has  been  said, 
that  the  watering  of  stock  depends  for  its  success 


Trusts  and  Monopolies.         311] 

chiefly  upon  the  secrecy  with  which  the  actions 
of  corporations  are  guarded  and  their  ability  to 
deceive  the  people;  and  that  public  supervision  of 
their  affairs  would  render  this  deception  imprac- 
ticable, and  place  the  state  in  a  position  to  effectu- 
ally prevent  this  and  many  other  abuses  which 
merely  require  to  be  exposed  in  order  to  enable  it 
to  remedy  them.  Some  of  these  abuses,  it  is  true, 
might  continue  to  be  practiced  for  a  time  even 
under  state  supervision,  but  it  would  be  with  the 
acquiescence  of  the  people,  and  only  for  so  long 
as  they  chose  to  tolerate  it;  whereas  their  right 
to  existence  now  depends  upon  their  ability  to  de- 
ceive the  state  and  the  public  as  to  whether  they 
are  really  abuses  of  power  or  merely  the  necessary 
outgrowth  of  legitimate  business  methods. 

Having  now  agreed  to  adopt  state  supervision, 
of  corporations  and  thus  provide  against  the  prac- 
tice of  stock  watering  and  many  other  evils  of  cor- 
poration management  which  may  easily  be  rem- 
edied under  existing  laws  or  amendments  thereto 
when  the  state  has  been  fully  informed  as  to  all 
the  facts  involved;  we  now  come  to  consider  the 
source  of  the  chief  evil  of  monopoly,  namely,  its 
power  to  raise  prices  and  to  extort  excessive  profits 
from  the  people. 

Since  the  modern  monopolist  has  very  generally 
assumed  the  corporate  form  of  organization  which 
we  have  just  agreed  to  subject  to  state  supervision, 
we  are  now  presumed  to  be  in  a  position  to  know 
when  this  power  to  fix  prices  is  being  exercised 
unnecessarily  to  the  injury  of  the  public ;  but  under 
the  present  method  of  dealing  with  corporations 
it  may  be  commonly  known  that  they  have  fixed 


312  Combinations, 

prices  sufficiently  high  to  yield  enormously  large 
profits,  and  j^et  the  state  be  held  powerless  to  in- 
terfere with  them  on  that  ground  alone,  as  in  the 
case  of  the  Standard  Oil  Company,  the  dividends 
of  which  have  reached  as  high  as  forty-eight  per 
cent,  per  annum,  according  to  its  published  state- 
ments. The  state,  it  is  true,  might,  under  pres- 
ent practice,  attack  these  corporations  on  the 
ground  of  creating  a  monopoly  or  conspiracy  in  re- 
straint of  trade,  for  the  power  to  raise  prices  im- 
plies the  power  to  corner  the  market  and  thus  more 
or  less  to  restrict  trade,  and  it  might  dissolve 
corporations  which  offend  in  this  way,  just  as  was 
done  in  the  instances  already  shown  of  prosecutions 
under  the  anti-trust  acts  of  the  several  states; 
but  these  large  corporations  are  capable  of  doing 
much  good  as  well  as  evil.  The  great  economies 
which  they  achieve  in  production  may  enable  them 
to  afford  lower  prices  and  better  service  to  the 
people;  their  improved  facilities  for  extending 
trade  into  foreign  countries  may  furnish  more 
regular  and  steady  employment  to  their  employees, 
and  their  destruction  is  therefore  not  to  be  desired 
if  their  evil  propensities  can  be  eliminated. 

Shall  the  remedy  be  applied  to  large  corpora- 
tions only?  If  so,  to  what  size?  Where  shall  the 
line  of  distinction  be  drawn?  But  small  corpora- 
tions are  liable  at  times  to  offend  in  this  way  as 
well  as  large  ones,  and  monopolies  are  not  always 
the  result  of  a  combination  of  small  concerns  sud- 
denly united  into  the  form  of  a  large  corporation, 
but  are  frequently  the  result  of  a  more  or  less 
gradual  growth,  and  it  is  altogether  likely  that 
the  germs  of  monopoly  might  have  been  found  in 


Trusts  and  Monopolies.         313 

%he  ambitions  of  the  officers  and  members  of  these 
smaller  concerns,  long  before  they  had  attained  to 
proportions  which  were  considered  inimical  to  the 
interests  of  the  public.  It  appears,  then,  that  size 
cannot  be  adopted  as  a  means  of  classification,  and 
that  some  remedy  should  be  devised  which  will  be 
alike  applicable  and  equitable,  at  least,  to  all  cor- 
porations. 

The  price  of  commercial  articles  depends  upon 
BO  many  varying  conditions  of  supply  and  demand, 
upon  the  rates  of  wages  to  be  paid,  the  price  of 
raw  materials,  the  cost  of  transportation,  etc.,  that 
it  would  be  practically  impossible  for  the  state 
to  fix  a  standard  of  prices  that  would  remain  fair 
to  all  parties  much  longer  than  the  time  it  would 
require  to  establish  it.  We  must,  therefore,  look 
to  some  other  means  of  regulating  this  power  of 
m^opolies. 

j^The  purpose  of  establishing  and  maintaining 
ariificially  high  prices  is  to  obtain  an  unusually 
lar^  share  of  profits  from  a  moderate  amount  of 
business.  The  particular  point  in  monopolies  ta 
which  all  of  the  people  object  is  their  disposition 
to  extort  excessively  large  profits  from  the  pur- 
chasing public.  If  prices  are  high  and  wages  are 
correspondingly  so,  a  portion  of  the  people  at  least 
share  in  the  benefits  of  the  enhanced  charges,  and 
the  profits  are  in  a  measure  divided;  but  when 
prices  are  high  and  wages  low,  the  cost  of  ma- 
terials for  production  remaining  the  same,  the 
profits  become  unreasonably  large  and  they  all  go 
to  the  monopolists,  while  no  part  of  the  people 
share  in  the  benefits  of  the  high  prices  which  all 
are  obliged  to  pay.    Why  not,  then,  strike  directly 


314  Combinations, 

at  the  profits,  and  apply  the  remedy  to  that  whicK 
is,  at  once,  both  the  end  and  the  immediate  cause 
of  the  greatest  oppression  of  the  people? 

Take  away  the  power  of  monopolies  to  reap  un- 
reasonably large  profits,  and  you  remove  the  in- 
centive which  leads  them  to  grind  the  people  be- 
neath their  feet  in  order  to  obtain  them.  Limit 
them  to  the  acquisition  of  a  reasonable  return  upon 
the  capital  actually  invested  in  their  business,  and 
you  effectually  check  many  of  the  excesses  which 
the  greed  for  gain  is  constantly  urging  them  to 
employ  in  order  to  increase  their  profits,  but  will 
not  stifle  that  ambition  which  stimulates  them  to 
strive  for  new  and  greater  possibilities  in  business, 
in  the  hope  of  securing  an  adequate,  but  legitimate, 
reward.  Limit  the  profits  which  corporations  shall 
be  allowed  to  earn,  to  a  certain  percentage  upon 
the  capital  actually  invested  in  their  business,  re- 
quiring them  to  return  to  the  people  all  that  may 
be  earned  in  excess  of  that  percentage  in  the  form 
of  reduced  prices  of  their  products,  and  you  draw 
the  venom  from  the  monster  which  is  now  terroriz- 
ing the  community,  and  leave  him  a  harmless  but 
powerful  and  useful  servant  of  society.  Deprive 
them  of  the  power  to  increase  their  own  profits  by 
depressing  the  wages  of  their  employees  to  the 
lowest  possible  level,  and  you  remove  the  chief 
cause  of  that  incessant  warfare  which  is  ever  going 
on  between  capital  and  labor;  you  eliminate  the 
one  great  obstacle  to  the  establishment  of  a  fair 
and  satisfactory  scale  of  wages  for  all  classes  of 
labor,  and  place  employer  and  employee  in  a  posi- 
tion to  become  truly  united  in  purpose,  for  their 
interests  will  no  longer  conflict,  but  must  become 


Trusts  and  Monopolies.         315 

mutually  dependent  upon  the  volume  of  business 
transacted. 

The  objection  will  at  once  be  made  that  this 
would  be  an  unwarrantable  invasion  of  the  natural 
right  of  every  man  to  secure  the  best  possible  com- 
pensation for  his  labor,  skill  or  foresight,  whether 
it  be  expended  in  direct  application  of  physical 
labor,  in  the  management  or  prosecution  of  busi- 
ness in  which  large  amounts  of  capital  may  be  em- 
ployed, or  in  the  direction  of  the  labor  of  other 
men.  To  this  we  reply  that  the  right  of  a  man 
to  secure  the  greatest  possible  return  upon  capital 
when  accompanied  by  the  expenditure  of  personal 
skill  or  supervision  as  in  the  management  of  a 
business,  is  no  greater  than  that  which  entitles 
him  to  obtain  the  largest  possible  amount  of  return 
upon  the  same  capital  when  unaccompanied  by  such 
personal  services;  and  that,  therefore,  a  man  is 
justified  in  procuring  the  highest  rates  of  interest 
on  money  which  he  is  about  to  loan  that  his  shrewd- 
ness in  bargaining  can  enable  him  to  obtain.  As 
an  elementary  proposition,  this  is  just  as  sound  as 
the  theory  that  a  man  is  entitled  to  secure  the 
largest  possible  amount  of  profits  upon  capital 
which  he  has  invested  in  business;  but  we  have 
become  accustomed  to  the  placing  of  restrictions 
upon  the  rates  of  interest  to  be  charged  for  the 
use  of  money,  and  no  one  now  thinks  of  question- 
ing the  right  of  the  state  to  do  so. 

As  money  is  now  generally  regarded  as  property, 
or  as  the  equivalent  or  representative  of  property, 
there  would  seem  to  be  no  good  reason  why  a  per- 
son should  not  be  allowed  to  exercise  the  same 
power  of  disposition  and  employment  over  it  as 


3i6  Combinations, 

he  does  over  other  forms  of  property.  It  is  true 
that  in  early  times  it  was  considered  unlawful  to 
receive  interest  upon  money  loaned,  and  that  in 
this  respect  it  was  considered  as  an  exception  to  the 
rights  which  pertained  to  other  forms  of  property; 
but  in  modem  times,  this  distinction  has  been  done 
away  with,  and  a  person  is  now  as  fully  protected 
in  requiring  interest  for  the  use  of  his  money  as 
in  demanding  hire  for  the  use  of  any  other  form 
of  property. 

We  have,  however,  restricted  the  right  to  receive 
interest  on  money  loaned,  to  what  is  considered  a 
reasonable  rate  for  the  use  of  it.  As  early  as  the 
reign  of  Henry  the  Eighth,  the  legal  rate  of  in- 
terest to  be  charged  for  the  use  of  money,  in  Eng- 
land, was  fixed  by  statute  laws  at  ten  per  cent, 
per  annum,  which  was  afterwards  reduced  to  eight 
per  cent.,  to  six  per  cent.,  to  five  per  cent.,  and  so 
on  until  about  the  seventeenth  year  of  the  reign 
of  Queen  Victoria,  when  all  legislation  upon  the 
subject  was  repealed. 

But  why  should  we  restrict  the  rate  of  compen- 
Bation  to  be  charged  for  the  use  of  money,  any 
more  than  that  to  be  charged  for  the  use  of  a 
horse  ?  Mr.  Blackstone  says :  "To  demand  an  ex- 
orbitant price  is  equally  contrary  to  conscience, 
for  the  loan  of  a  horse,  or  the  loan  of  a  sum  of 
money,  but  a  reasonable  equivalent  for  the  tempo- 
rary inconvenience  which  the  owner  may  feel  by 
the  want  of  it,  and  for  the  hazard  of  his  losing  it 
entirely,  is  not  more  immoral  in  one  case  than  it  ^ 
is  in  the  other."  If  it  is  equally  unco^sciDnahte.  / 
and  immoral,  it  is  equally  unjust  and  should  be 
made  equally  illegal. 


Trusts  and  Monopolies.         317 

Why  should  a  man  who  has  money  to  lend  be 
required  to  accept  five  per  cent,  for  the  use  of  it, 
while  the  borrower  is  allowed  to  make  fifty  per 
cent,  upon  the  investment  of  the  same  money  ?  If 
it  be  said  that  the  rates  of  interest  are  fixed  by  law 
in  order  to  prevent  money  lenders  from  taking  ad- 
vantage of  the  necessities  of  the  borrowers  and 
exacting  excessively  high  rates  of  interest  from 
them,  we  ask,  are  not  many  of  the  borrowers  in 
like  manner  availing  themselves  of  the  needs  of  the 
public  in  exacting  forty  or  fifty  per  cent,  profit 
upon  the  money  which  they  invest  in  business? 
Why  should  a  man  be  obliged  to  accept  five  per 
cent,  on  his  money  if  he  loans  it  to  another,  but 
allowed  to  make  one  hundred  or  even  a  greater 
percentage  upon  the  same  money  if  he  invests  it  in 
business  or  in  property  of  any  kind?  The  truth 
is,  there  is  no  just  distinction  to  be  made  between 
the  earnings  of  money  pure  and  simple  when  let 
out  as  a  loan,  or  when  invested  as  capital  in  busi- 
ness, save  the  difference  in  the  risk  involved,  and 
the  uncertainty  of  regular  returns,  and  these  points 
can  be  taken  into  account  in  determining  the  rates 
of  profit  to  be  allowed  by  law. 

The  right  of  the  state  to  regulate  the  rates  of 
interest  to  be  charged  for  the  use  of  money  is 
founded  in  the  power  and  duty  of  government,  to 
which  we  have  before  referred,  to  protect  every  in- 
dividual from  oppression  by  the  wealthy  and  the 
powerful,  and  the  right  extends  equally  to  the 
regulation  of  the  use  of  every  other  kind 
of  property  as  well  as  money.  Every  in- 
dividual has  an  undoubted  right  to  use  his 
own    property    as    he    pleases     and    to    charge 


3i8  Combinations, 

for  it  whatever  price  he  will,  so  long  as  he  does 
not  interfere  with  the  rights  of  other  individuals; 
but  whenever  he  acquires  a  monopoly  of  any  ar- 
ticle which  is  essential  to  the  comfort  or  conven- 
ience of  other  members  of  society,  or  involves  the 
aid  of  government  to  assist  him  in  the  conduct  of 
his  business,  he  subjects  himself  to  the  right  of  the 
government  to  interfere  in  his  affairs  so  far  as  may 
be  necessary  to  protect  the  rights  of  all  its  citizens. 
The  rule  laid  down  by  Lord  Ellenborough  in  the 
English  case  of  Alnutt  versus  Inglis,  to  which  we 
have  before  referred,  applies  as  well  to  the  affairs 
of  industrial  combinations  as  to  natural  monop- 
olies, and  as  it  is  so  clearly  in  point  we  shall  re- 
peat it  here.  He  says:  "There  is  no  doubt  that 
the  general  principle  is  favored,  both  in  law  and 
justice,  that  every  man  may  fix  what  price  he 
pleases  upon  his  own  property  for  the  use  of  it; 
but  if  for  a  particular  purpose  the  public  have  a 
right  to  resort  to  his  premises  and  make  use  of 
them,  and  he  have  a  monopoly  in  them  for  that 
purpose,  if  he  will  take  the  benefit  of  that  monop- 
oly he  must  as  an  equivalent,  perform  the  duty 
attached  to  it  on  reasonable  terms.''  The  futility 
of  legislative  attempts  to  regulate  the  rates  of  in- 
terest is  now  quite  "generally  conceded,  but  the 
right  of  government  to  impose  such  restrictions, 
if  they  could  be  enforced,  has  not,  we  believe,  been 
seriously  questioned. 

The  reasons  for  the  establishment  of  limitations 
upon  the  rates  to  be  charged  for  the  use  of  money 
are  to  be  found,  in  the  first  place,  in  the  fact  that 
in  early  times  loans  were  chiefly  made  for  the  pur- 
pose of  purchasing  tools  or  farming  implements. 


Trusts  and  Monopolies.         319 

seed,  stock,  etc.,  or  in  cases  of  great  distress,  and 
it  was  thought  to  be  taking  an  undue  advantage 
of  the  unfortunate,  as  well  as  being  unchristian- 
like,  to  exact  from  the  debtor  the  repayment  of  a 
greater  sum  than  he  had  borrowed.  As  trade  de- 
yeloped,  however,  and  loans  began  to  be  made  for 
commercial  purposes,  thus  becoming  the  means  of 
securing  large  profits  to  the  borrowers,  the  pay- 
ment of  moderate  rates  of  interest  for  the  use  of 
money  began  to  be  tolerated.  But  in  deference  to 
the  long  established  moral  objection  to  the  ac- 
ceptance of  interest  of  any  kind,  and  in  order  to 
protect  those  for  whose  benefit  the  moral  prohibi- 
tion had  been  invoked,  from  unreasonable  oppres- 
sion, it  was  determined  to  establish  a  legal  rate 
of  interest  which  might  be  charged  for  the  use  of 
money,  and,  at  first,  the  exaction  of  a  higher  rate 
than  this  was  called  usury,  and  was  made  punisha- 
ble by  severe  penalties.  In  more  recent  times  it  has 
been  the  practice,  in  some  jurisdictions,  to  establish 
what  is  usually  termed  a  legal  rate  which  must  pre- 
vail in  all  cases  in  which  the  parties  have  not 
agreed  upon  any  specified  rate,  and  also  a  higher 
rate  commonly  known  as  the  contract  rate,  up  to 
which  the  parties  are  at  liberty  to  contract.  In 
the  next  place,  the  money  of  civilized  nations  is 
seldom  left  free  to  follow  the  natural  requirements 
of  trade  to  the  same  extent  that  other  commodities 
are,  but  it  is  coined  and  issued  by  the  government 
itself  or  by  banks  which  are  subject  to  its  controL 
Thus  the  supply  of  money  is  increased  or  dimin- 
ished by  artificial  means,  though  it  is  supposed  to 
follow  the  requirements  of  a  reasonable  supply  and 
demand  as  understood  by  the  persons  who  happen 


320  Combinations, 

to  be,  at  the  time,  intrusted  with  the  administra- 
tion of  the  affairs  of  government.  But  the  regula- 
tion of  the  supply  is  always  presumed  to  be  for 
the  benefit  of  the  whole  people,  and  as  it  was  feared 
that  some  individuals  might  take  advantage  of 
special  conditions  and  make  an  unreasonably  high 
price  for  the  use  of  money,  it  was  thought  best  to 
establish  a  uniform  rate  for  all. 

After  endeavoring  for  over  three  hundred  years 
to  regulate  the  rate  of  interest  by  law,  it  gradu- 
ally began  to  be  perceived  that  the  legislative  pro- 
visions on  the  subject  had,  in  a  large  measure, 
failed  to  accomplish  the  purpose  for  which  they 
were  intended,  and  economists  are  now  pretty  well 
iigreed  that  the  economic  effect  of  placing  limita- 
tions upon  the  rates  of  interest  has  been  to  raise 
the  rate  of  interest  actually  paid^  rather  than  to 
lower  it;  or,  in  other  words,  that  restrictions  have 
failed  to  restrict,  and  that  the  law  of  supply  and 
demand  has  proved  to  be  more  potent  than  statu- 
tory enactments.  At  times  when  money  was  scarce 
and  the  demands  of  the  borrowers  were  pressing, 
l>oth  parties  conspired  to  evade  the  law  by  paying 
in  excess  of  the  established  rates  of  interest,  and  as 
in  many  places  this  jeopardized  the  entire  prin- 
cipal, lenders  have  exacted  an  additional  amount 
of  interest  by  way  of  insurance  against  the  risk 
involved.  While  these  provisions  have  thus  fallen 
far  short  of  attaining  the  ends  for  which  they  were 
designed,  they  have  undoubtedly  deterred  many, 
especially  among  the  unprofessional  lenders,  from 
demanding  excessively  high  rates,  and  have  thus 
been  a  benefit  to  many  of  the  poorer  class  of  bor- 
rowers; and  though  all  attempts  at  legal  regulation 


Trusts  and  Monopolies.         32 r 

of  the  rates  of  interest  have  been  abandoned  in 
England,  the  practice  is  still  adhered  to  by  nearly 
every  other  civilized  nation,  and  similar  laws  are 
to  be  found  on  the  statute  books  of  most  of  our 
own  states. 

The  failure  of  all  attempts,  by  legislation,  to  en- 
force the  observance  of  a  uniform  rate  of  interest 
is  due  to  the  fact  that  whatever  restrictions  or 
burdens  may  be  placed  upon  the  making  of  loans, 
must  eventually  be  borne  by  the  borrower,  and 
this  is  the  vital  distinction  between  the  attempted 
regulation  of  interest  and  the  proposed  limitation 
upon  the  rate  of  profits.  Another  source  of  weak- 
ness in  the  usury  laws  is  that  they  have  sought  only 
to  affect  the  rates  of  interest  upon  loans  without 
attempting  to  reach  the  natural  interest  on  cap- 
ital used  in  production. 

Economists  are  agreed  that  a  tax  upon  loans,  no 
matter  how  it  may  be  imposed,  will  always  be 
shifted  so  as  to  fall  upon  the  borrower,  but  they 
are  equally  agreed  that  a  tax  levied  upon  all  profits 
must  remain  with  the  payer  and  cannot  be  shifted. 
John  Stuart  Mill,  speaking  of  a  tax  on  profits, 
says:  "A  tax  on  profits,  like  a  tax  on  rent,  must, 
at  least  in  its  immediate  operations,  fall  wholly  on 
the  payer.  All  profits  being  alike  affected,  no  re- 
lief can  be  obtained  by  a  change  of  employment. 
If  a  tax  were  laid  on  the  profits  of  any  one  branch 
of  productive  employment,  the  tax  would  be  vir- 
tually an  increase  of  the  cost  of  production,  and 
the  value  and  price  of  the  article  would  rise  ac- 
cordingly, by  which  the  tax  would  be  thrown  upon 
the  consumers  of  the  commodity,  and  would  not 
affect  profits.     But  a  general  and  equal  tax  on 


322  Combinations, 

all  profits  would  not  affect  general  prices,  and 
would  fall,  at  least  in  the  first  instance,  on  capi- 
talists alone. 

"There  is,  however,  an  ulterior  effect,  which,  in 
a  rich  and  prosperous  country,  requires  to  be  taken 
into  account.  It  may  operate  in  two  different 
ways:  (1)  The  curtailment  of  profit,  and  the  con- 
sequent increased  difficulty  in  making  a  fortune 
or  obtaining  a  subsistence  by  the  employment  of 
capital,  may  act  as  a  stimulus  to  inventions,  and 
to  the  use  of  them  when  made.  If  improvements 
in  production  are  much  accelerated,  and  if  these 
improvements  cheapen,  directly  or  indirectly,  any 
of  the  things  habitually  consumed  by  the  laborer, 
profits  may  rise,  and  rise  sufficiently  to  make  up 
for  all  that  is  taken  from  them  by  the  tax.  In 
that  case  the  tax  will  have  been  realized  without 
loss  to  any  one,  the  produce  of  the  country  being 
increased  by  an  equal,  or  what  would  in  that  case 
be  a  far  greater  amount.  The  tax,  however,  must 
even  in  this  case  be  considered  as  paid  from  profits, 
because  the  receivers  of  profits  are  those  who  would 
be  benefited  if  it  were  taken  off. 

"But  (2)  though  the  artificial  abstraction  of 
a  portion  of  profits  would  have  a  real  tendency  to 
accelerate  improvements  in  production,  no  consid- 
erable improvement  might  actually  result,  or  only 
of  such  a  kind  as  not  to  raise  general  profits  at 
all,  or  not  to  raise  them  so  much  as  the  tax  had 
diminished  them.  If  so,  the  rate  of  profit  would 
be  brought  closer  to  that  practical  minimum  to 
which  it  is  constanly  approaching.  At  its  first  im- 
position the  tax  falls  wholly  on  profits;  but  the 
amount  of  increase  of  capital,  which  the  tax  pre- 


Trusts  and  Monopolies.         323 

vents,  would,  if  it  had  been  allowed  to  continue, 
have  tended  to  reduce  profits  to  the  same  level  ^ 
and  at  every  period  of  ten  or  twenty  years  there 
will  be  found  less  difference  between  profits  as  they 
are  and  profits  as  they  would  in  that  case  have 
been,  until  at  last  there  is  no  difference,  and  the 
tax  is  thrown  either  upon  the  laborer  or  upon  the 
landlord.  The  real  effect  of  a  tax  on  profits  is  to 
make  the  country  possess  at  any  given  period  a 
smaller  capital  and  a  smaller  aggregate  production, 
and  to  make  the  stationary  state  be  attained  earlier, 
and  with  a  smaller  sum  of  national  wealth/* 

A  tax  on  profits  would  afford  no  relief  to  the 
present  situation,  for  though  it  might  deprive  the 
combinations  of  some  portion  of  their  ill-gotten 
wealth,  it  would  fall  alike  upon  the  just  and  the 
unjust,  and  thus  prove  an  injury  to  many  of  those 
whom  it  was  intended  to  relieve.  Or,  if  a  given 
rate  of  profits  be  exempted  from  taxation,  as  is- 
now  done  in  many  places  with  household  goods, 
mechanics'  tools,  etc.,  the  tax  collected  upon  the 
excessive  profits  would  only  be  a  portion  of  that 
which  is  wrongfully  taken  from  the  public  and  be 
but  a  partial  measure  of  relief,  while  if  the  whole 
of  the  excessive  profits  were  confiscated  to  the  state, 
the  benefits  resulting  from  it  would  be  purely 
local  and  the  people  would  not  be  relieved  of  the  ^ 
burden  of  high  prices.  Taxation  of  profits,  then,  i 
would  not  afford  the  relief  sought.  * 

A  limitation  upon  the  rate  of  profits  is  precisely  \ 
the  same  in  principle  as  a  tax  on  profits.     The  \ 
weight  of  the  burdens  thus  imposed  cannot  be  cast 
upon  the  consumer  of  the  commodity  from  the 
production  of  which  the  profit  has  been  derived. 


324  Combinations, 

and  it  secures  all  the  beneficial  results  of  such" 
taxes,  except  the  cash  which  it  is  not  intended  to 
collect,  while  it  avoids  their  objectionable  features. 
It  serves  to  stimulate  invention  and  industry  in  the 
manner  suggested  by  Mr.  Mill,  but  precludes  the 
evil  consequences  which  he  says  might  follow  from 
the  imposition  of  a  tax,  by  not  attempting  to  reduce 
profits  below  the  normal  level. 

Writers  on  political  economy  have  heretofore 
held  that  competition  and  the  shifting  of  capital 
from  one  industry  to  another  would  always-reduce 
profits  in  all  lines  of  industry  to  what  they  term 
"the  ordinary  rate  of  profit";  but  conditions  have 
so  completely  changed  within  the  last  few  years, 
and  co-operative  control  has  so  generally  supplanted 
the  competitive  system  in  the  industrial  field,  that 
these  old  safeguards  can  no  longer  be  relied  upon 
to  protect  the  people  from  unjust  extortion.  Pro- 
fessor Richard  T.  Ely  speaking  of  the  subject 
concludes  as  follows :  "It  is  to  be  noted  that  while 
pure  profit,  apart  from  the  gains  due  to  a  happy 
combination  of  affairs  (conjuncture),  is  largely  a 
surplus  produced  by  genius,  and  is  in  so  far  no 
burden  to  the  community  which  tends  to  profit  by 
it  eventually,  monopoly  profit  is  a  surplus  extorted 
by  power  and  privilege,  and  invariably  a  loss  to 
the  community.  Distribution  of  wealth  comes  in- 
creasingly under  the  influence  of  monopoly.  The 
economic  surplus  yielded  by  monopoly  is  the  source 
of  many  of  the  largest  fortunes  of  our  day,  and  is 
the  prime  cause  of  the  growth  of  inequalities  of 
fortune  during  the  present  century.  While  in  gen- 
eral competition  increases  in  severity,  an  increas- 
ing proportion  of  the  industrial  field  is  withdrawn 


Trusts  and  Monopolies.         325 

from  competition  and  falls  under  the  control  of 
monopoly.  There  is  thus  a  growing  class  enjoying 
special  economic  privileges.^'  It  is  this  excess  of 
profit  which  is  wrongfully  taken  from  the  consumer 
by  means  of  the  power  which  monopoly  gives  to 
(the  producer  that  we  wish  to  reach,  and  by  means 
of  a  reasonable  restriction  upon  the  rate  of  profits 
to  be  collected,  it  is  proposed  to  diffuse  the  bene- 
fits of  improved  facilities  for  production  in  the  form 
of  reduced  prices  among  the  people. 

Economists  are  wont  to  include  as  one  of  the 
elements  of  profit,  what  they  term  salaries  of  su- 
perintendents. This  is  on  the  supposition  that  in- 
dustrial establishments  are  owned  and  operated  by 
individual  proprietors,  and  the  item  is  intended  to 
represent,  at  least,  a  part  of  the  profit  of  the  owner ; 
but  in  this  day  of  trusts  and  combinations,  when 
corporations  have  assumed  control  of  practically 
every  branch  of  industry,  every  one  who  devotes 
any  time  to  the  business  is  paid  a  fixed  salary, 
and  these  must  all  be  charged  under  the  general 
head  of  wages  and  can  no  longer  be  classed  as  an 
element  of  profit.  The  other  items  commonly  in- 
cluded as  profit;  interest  on  capital,  insurance 
against  risk  of  loss,  replacement  of  capital  con- 
sumed and  clear  profit,  are  now  separately  ac- 
counted for  in  the  system  of  bookkeeping  used  in 
many  of  our  large  industrial  establishments  and 
can  be  required  to  be  shown  by  all,  and  it  is  this 
item  of  clear  profit  that  we  wish  to  restrict  within 
reasonable  limits.  The  economic  nature  of  profit 
and  its  relation  to  production  have  been  quite  fully 
discussed  by  writers  on  economics,  and  it  does 
not  seem  desirable  to  go  any  deeper  into  the  sub- 


326  Combinations, 

ject  here  than  is  necessary  to  indicate  the  manner 
in  which  it  may  be  affected  by  legislative  provis- 
ions. With  public  supervision  of  the  affairs  of 
corporations  once  established,  it  would  be  an  easy 
matter  to  determine  the  profits  of  any  given  con- 
cern, and  it  is  merely  a  matter  of  detail  in  the 
framing  of  a  statute,  to  arrange  provisions  which 
will  require  these  to  be  kept  within  the  prescribed 
limits. 

Some  attempts  at  legislation  in  this  direction  are 
already  to  be  found  in  the  regulation  by  the  state 
of  the  charges  to  be  made  by  public  service  cor- 
porations, such  as  railroad  companies;  the  regu- 
lation of  street  car  fare;  cab  and  carriage  hire; 
telegraph  and  telephone  rates ;  warehouse  charges, 
and  the  like;  so  our  proposition  is  merely  to  do 
directly  and  effectively  with  all  corporations,  that 
which  it  has  already  attempted  to  do  indirectly  in 
these  cases. 

But,  as  we  have  before  remarked,  we  are,  in'' 
this  discussion,  merely  considering  the  application; 
of  remedies  to  corporations,  and  since  these  are 
merely  creatures  of  legislation  and  have  no  in-j 
herent  or  natural  rights  of  any  kind,  most  of  the 
objections  to  the  proposition  to  limit  the  profits  to 
be  derived  from  business,  which  are  based  upon 
the  natural  rights  of  individuals,  do  not  relate  to 
these  cases;    while  the  considerations  which  have 
been  urged  in  support  of  its  adoption,  apply  with 
special  force  to  corporations  because  of  the  greater; 
apparent  necessity  for  it  in  relation  to  their  af-i 
fairs.  , 

Another  distinction  which  should  be  carefully 
borne  in  mind  in  relation  to  this  proposition  is 


Trusts  and  Monopolies.         327 

this,  that  it  is  not  proposed  to  limit  the  compensa- 
tion to  be  paid  to  any  individuals  for  labor,  skill, 
judgment,  or  services  of  any  kind.  This  is  already 
sufficiently  restricted  by  the  selfishness  of  those 
who  employ  them,  and  it  is  not  proposed  to  inter- 
fere with  these  relations,  but  it  is  intended  to  limit 
the  profits  to  be  paid  upon  capital  which  is  in- 
vested in  the  business  of  these  corporations,  dis- 
tinct from  the  compensation  which  is  paid  to  those 
who  are  in  any  way  engaged  in  their  management. 
The  wages  and  salaries  of  all  employees  are  now 
determined  and  apportioned  before  the  profits  or 
dividends  are  declared,  and  it  is  with  these  profits 
that  we  now  propose  to  deal. 

It  may  now  be  suggested  that  the  adjustment  of 
wages  and  salaries  would  furnish  a  convenient 
means  of  appropriating  all  surplus  profits,  and  that 
it  would  doubtless  be  used  as  a  means  of  defeating 
any  restrictive  provisions  which  the  law  might  at- 
tempt to  place  upon  the  earnings  of  the  business; 
but  the  temptation  would  be  no  greater  then,  than 
it  now  is,  to  induce  the  officers  and  directors  of  a 
corporation  to  appropriate  an  unreasonably  large 
share  of  the  profits  to  their  own  use  in  the  form 
of  salaries;  yet  the  interest  of  the  stockholders  is 
usually  sufficient  to  restrict  them  to  what  is  con- 
sidered a  reasonable  amount  of  compensation  for 
their  services.  The  state  exercising  supervision 
over  the  affairs  of  corporations  would  have  a  much 
better  opportunity  of  knowing  the  condition  of 
the  business  and  be  far  more  capable  of  enforcing 
its  will  than  the  stockholders  now  are,  and  why 
should  it  not  be  as  successful  in  restricting  cor- 
poration management  within  the  bounds  of  rea- 


328  Combinations, 

gonable  expenses?  Under  the  present  system  of 
strict  privacy  in  the  management  of  corporate  af- 
fairs, it  would  be  manifestly  impracticable  to  en- 
force such  a  remedy  as  we  are  now  considering, 
and  an  attempt  to  do  so  would  be  merely  placing 
an  additional  premimn  upon  dishonesty ;  but  hav- 
ing adopted  public  supervision  of  the  affairs  of 
corporations,  it  becomes  not  only  possible  but  easy 
of  application. 

The  proposed  regulation  is,  of  course,  intended 
to  affect  only  the  clear  profits  as  shown  by  a  true 
account  of  the  operations  of  the  business;  and 
that,  whether  they  are  held  in  reserve  in  the  treas- 
ury, invested  in  the  erection  of  new  plants  or  in 
the  extension  of  old  ones,  or  paid  out  in  dividends ; 
but  the  public  has  become  accustomed  to  judge 
of  the  profits  of  corporations  merely  by  the  rates 
of  dividends  paid  to  their  stockholders,  and  it  is 
believed  that  the  practical  operation  of  the  pro- 
posed remedy  will  be  more  generally  understood  if 
we  illustrate  it  in  that  way.  Dividends  are  liable 
to  include  any  or  all  of  the  elements  which  con- 
stitute gross  profit,  but  for  the  sake  of  convenience 
we  shall  assume  that  the  rate  of  profit  fixed  by  law 
is  such  that  together  with  insurance  and  the  amount 
allowed  for  replacement,  which  is  virtually  a  re- 
payment of  a  portion  of  the  capital  invested,  it 
will  just  equal  the  established  rate  of  interest.  If 
conditions  were  free  from  the  control  of  trusts  and 
combinations,  this  rate  would  probably  be  sufficient 
to  attract  a  large  amount  of  free  capital  into  the 
business  and  thus  lead  to  a  reduction  of  the  profits, 
but  they  are  not;  hence  the  necessity  for  legisla- 
iive  interference.     We  shall  also  assume  that  the 


Trusts  and  Monopolies.         329 

legal  rate  of  interest  be  paid  on  the  capital  actually 
invested,  or  necessary  for  duplication  of  the  plants, 
working  capital,  etc.;  and  we  then  have  a  legal 
rate  of  dividends  equal  to  twice  the  rate  of  in- 
terest now  allowed  to  be  charged  on  loans.  This 
rate  would  seem  to  be  large  enough  to  satisfy  the 
reasonable  demands  of  investors,  and  yet  small 
enough  to  prevent  the  excessive  profits  which  many 
of  the  great  combinations  are  known  to  extort  from 
the  people. 

It  may  seem  strange  that  so  high  a  rate  of 
profit,  amounting  in  most  states  to  ten  or  twelve 
per  cent.,  should  be  suggested,  in  view  of  the  fact 
that  the  public  is  daily  investing  its  money  freely 
in  stocks  which  pay  only  five,  six  or  seven  per  cent, 
dividends  per  annum;  but  it  should  be  remem- 
bered in  the  first  place,  that  this  is  merely  a  rate 
beyond  which  profit  shall  not  be  drawn;  and  in 
the  second  place,  that  the  great  majority  of  these 
stocks  upon  which  the  public  draws  five,  six  and 
seven  per  cent,  dividends,  have  been  so  well  watered 
that  they  pay  to  the  inside  operators  of  these  cor- 
porations two,  three,  four  and  five  times  these 
rates  upon  the  capital  actually  invested  in  the  busi- 
ness. 

Lest  this  estimate  of  the  profits  earned  by  these 
large  corporations  may  seem  to  those  who  are  not 
familiar  with  the  subject,  to  be  too  large  to  be 
taken  seriously,  we  here  present  a  statement  of  the 
earnings  of  the  Standard  Oil  Company  for  the 
last  nine  years,  as  shown  by  *Toor's  Manual  of 
Railroads"  for  the  year  1902. 

The  Standard  Oil  Company  has  paid  dividends 
as  follows :  twelve  per  cent,  in  1894, twelve  per  cent. 


330  Combinations, 

in  1895,  thirteen,  ten,  three  and  five  per  cent,  in 
1896;  ten,  ten,  five  and  eight  per  cent,  in  1897; 
ten,  eight,  five  and  seven  per  cent  in  1898;  six, 
twelve,  five  and  ten  per  cent,  in  1899 ;  twenty,  ten, 
eight  and  ten  per  cent,  in  1900;  twenty,  twelve, 
eight  and  eight  per  cent,  in  1901,  and  forty-five  per 
cent,  in  1902. 

While  this  company  has  thus  boldly  announced 
its  profits  to  the  public,  and  made  itself  a  conspic- 
uous target  for  attack,  it  is  believed  that  many  more 
of  these  large  corporations  would  not  appear  to  be 
60  much  less  guilty  of  extortion,  if  they  had  not 
resorted  to  the  watering  of  their  stocks  in  order 
to  hide  their  profits. 

The  legal  rates  of  interest  to  be  charged  for  the 
use  of  money  are  not  established  by  law  for  the 
purpose  of  fixing  the  value  of  money ;  that  is  regu- 
lated by  supply  and  demand,  and  by  the  custom 
and  conditions  of  business,  just  as  its  purchasing 
power  is  determined,  and  the  statute  merely  gives 
definite  expression  to  the  law  which  the  custom  of 
the  commercial  world  has  already  established.  The 
question  in  the  mind  of  the  legislator  who  is  about 
to  frame  a  statute  on  this  subject,  is  not — how  much 
can  we  lower  the  rates  of  interest  now  charged  for 
the  use  of  the  money,  but — what  is  the  prevailing 
rate  now  recognized  by  the  business  world?  It 
would  be  folly  for  any  state  to  attempt  arbitrarily 
to  reduce  the  rates  of  interest  below  that  fixed  by 
the  money  market  of  the  state;  for  as  money  is 
free  to  move  from  state  to  state^  its  value  is  de- 
termined by  the  conditions  which  prevail  through- 
out the  whole  country,  and  a  general  level  of  rates 
proportionate  to  the  securities  to  be  obtained,  and 


Trusts  and  Monopolies.         331, 

the  profits  that  may  be  earned,  is  preserved,  and 
any  attempt  to  fix  any  other  value  upon  it,  would 
merely  serve  to  drive  the  money  from  the  state  and 
thus  defeat  the  very  purpose  which  the  law  sought 
to  secure.  If  it  were  otherwise,  since  the  borrowers 
are  always  in  the  majority,  they  might  just  as  well 
lower  the  rate  of  interest  at  once  to  two  or  three 
per  cent.,  and  make  good  times  for  all. 

The  purpose  of  these  statutes,  then,  is  to  pro- 
hibit the  overreaching  of  the  prevailing  rates  of 
interest  in  extreme  cases;  to  prevent  lenders  from 
availing  themselves  of  any  special  advantages  which 
they  may  possess,  such  as  a  corner  upon  the  avail- 
able supply  of  money,  etc.,  or  of  the  ignorance 
or  necessities  of  the  borrowers,  and  it  would  be  just 
the  same  in  establishing  a  legal  rate  of  profit  to 
be  earned  by  corporations. 

The  customary  course  of  trade  would  determine 
what  should  be  considered  a  fair  and  reasonable 
average  of  profits  to  be  derived  from  business  en- 
terprises, and  the  law  should  prevent  the  collec- 
tion of  an  unreasonable  amount  in  excess  of  that 
average.  We  have  already  unconsciously  come  to 
recognize  what  may  be  termed  a  reasonable  rate 
of  profits  to  be  derived  from  business  investment; 
thus,  no  one  objects  to  a  statement  showing  earn- 
ings of  six,  eight,  or  even  ten  per  cent,  per  annum, 
but  when  we  speak  of  thirty  or  forty  per  cent.,  as 
in  the  case  of  the  Standard  Oil  Company,  there  is 
a  universal  gasp  of  surprise,  and  every  one  feels 
that  a  gross  injustice  is  being  done  to  the  con- 
sumers who  pay  the  prices  which  produce  these 
enormous  profits,  and  that  it  should  be  remedied. 
in  some  way. 


332  Combinations, 

A  liberal  range  of  profits  should,  however,  be 
allowed  at  first  until  the  graver  offenders  can  be 
brought  within  bounds,  and  the  S3'stem  put  into 
working  order,  and  then,  in  the  light  of  experience, 
the  limit  may  be  lowered,  as  in  the  judgment  of  the 
people  it  may  be  required,  just  as  has  been  done 
with  the  rates  of  interest  upon  money  loaned.  A 
small  margin  should,  also,  always  be  allowed  above 
the  level  of  the  general  average  of  profits  as  an 
encouragement  to  enterprise  and  invention,  and  no 
attempt  should  be  made  to  stamp  the  speculative 
element  entirely  out  of  business,  for  it  is  that 
which  gives  life  to  trade,  and  which  has,  more  than 
anything  else,  led  to  the  wonderful  growth  and 
development  of  our  industrial  system. 

Again,  at  times  the  profits  in  business  are  liable 
to  be  very  high  in  one  year,  and  lower  in  another, 
and  to  prevent  any  injustice  which  might  arise 
from  these  fluctuations,  it  would  doubtless  be  neces- 
sary to  average  the  profits  from  year  to  year  or, 
perhaps,  during  a  number  of  years.  Thus,  if  the 
legal  rate  of  profit  be  ten  per  cent.,  and  the  earn-, 
ings  of  a  given  company  for  the  year  are  forty  per 
cent.,  a  dividend  of  ten  per  cent,  would  be  paid, 
but  the  balance  would  be  held  in  the  treasury  for 
the  payment  of  dividends  in  succeeding  years,  the 
price  of  the  products  would  have  to  be  reduced  say 
twenty-five  per  cent,  which  would  still  leave  a 
profit  of  five  per  cent,  if  business  conditions  re- 
mained the  same,  and  further  reductions  and  ad- 
justments would  have  to  be  made  from  time  to 
time  in  order  to  prevent  the  accumulation  of  too 
large  a  surplus. 

The  operation  of  this  remedy  would  thus  lead 


Trusts  and  Monopolies.         333 

directly  to  a  reduction  in  the  price  of  those  articles 
from  the  production  of  which  excessive  profits  are 
now  derived,  and  the  knowledge  that  the  legal  rate 
of  earnings  could  not  be  exceeded,  would  most  ef- 
fectively check  the  natural  disposition  of  monopo- 
lists to  raise  their  charges  whenever  a  favorable 
opportunity  to  do  so  is  presented.  / 

From  all  this  it  appears  that  the  enactment  of  j 
laws  limiting  the  dividends  to  be  paid  by  corpora-  \ 
tions  to  a  certain  percentage  uj)on  the  capital  act- 
ually invested  in  their  business,  would  be  a  rea- 
sonable exercise  of  the  powers  of  government,  that 
it  would  not  be  an  invasion  of  any  natural  right  of 
individuals,  that  it  would  not  be  a  violation  of  any 
right  which  corporations  might  reasonably  expect 
to  receive  from  the  state  as  a  necessary  incident  to 
the  powers  granted  for  the  prosecution  of  their 
business,  that  it  would  be  in  perfect  harmony  with 
the  principles  of  law  under  which  the  legal  rates 
of  interest  to  be  charged  for  the  use  of  money 
have  been  established,  and  the  charges  of  railways 
and  other  public  service  corporations  have  been  reg- 
ulated, that  it  would  remedy  many  of  the  evils 
which  now  appeal  most  strongly  to  the  people  for 
redress,  that  it  would  tend  to  establish  more  harmo- 
nious relations  between  employers  and  employees 
and  effect  a  more  equal  division  of  the  fruits  of 
production  between  capital  and  labor,  and  that  it 
would,  in  conjunction  with  state  supervision  of  the 
affairs  of  corporations,  be  practicable,  effective,  and 
simple  of  application,  and  be  just,  alike  to  the  cor- 
porations and  the  public. 

Having  thus  provided  for  the  control  of  domestic 
corporations  which;  as  we  have  before  remarked. 


334  Combinations, 

are  creatures  of  the  legislative  power  of  the  state 
and  therefore  amenable  to  any  kind  of  conditions 
which  it  may  see  fit  to  impose,  how  are  we  to  regu- 
late foreign  corporations  which  seek  to  do  business 
within  our  states  ?  These  foreign  corporations,  like 
our  domestic  ones,  are  merely  creatures  of  legisla- 
tive power,  and  as  the  legislative  acts  of  any  state 
have  no  force  beyond  its  territorial  limits,  no  body 
or  corporation  created  by  it  can  claim  any  rights 
or  exercise  any  powers  beyond  its  jurisdiction,  ex- 
cept such  as  may  be  tolerated  by  the  legislature 
of  the  state  in  which  it  seeks  to  do  business.  There 
are  no  natural  rights  or  constitutional  restrictions 
to  protect  corporations  from  discriminating  or 
oppressive  legislation,  and  their  very  right  to  ex- 
istence in  a  foreign  state  depends  solely  upon  the 
will  of  its  legislature  to  allow  them  to  enter  its 
territory. 

Mr.  Hare,  in  his  lecture  on  the  American  Con- 
stitution, speaking  on  this  subject,  summarizes  the 
decisions  of  the  Supreme  Court  of  the  United 
States,  as  follows:  "Corporations  are  creatures  of 
legislation,  and  have  no  legal  existence  beyond  the 
jurisdiction  of  the  government  to  which  they  owe 
their  being.  Xo  other  government,  therefore,  need 
recognize  them  or  give  them  the  protection  of  its. 
laws;  save  from  a  comity  of  which  the  legislature 
must  judge;  and  as  artificial  persons  they  are  not 
within  the  clause  that  the  citizens  of  each  state 
shall  have  all  the  rights,  privileges,  and  immunities 
of  the  citizens  of  the  several  states.  A  state  may^ 
I  therefore,  exclude  foreign  corporations,  or  pre- 
scribe the  terms  on  which  they  shall  be  permitted 
^to  transact  business  within  her  limits,  and  exact 


Trusts  and  Monopolies.         335 

a  license  fee  as  the  price  of  admission;  but  the 
power  must  be  so  exercised  as  not  to  hinder,  regu- 
late, or  burden  the  commerce  among  the  states  or 
with  foreign  countries,  which  is  exclusively  under 
the  control  of  the  General  Government,  whether  the 
persons  who  carry  it  on  are  natural  or  artificial 
citizens  of  the  states,  or  subjects  of  a  foreign  gov- 
ernment; and  a  statute  which  imposes  limitations 
on  the  right  of  companies  chartered  by  other  states 
to  make  contracts  in  the  prosecution  of  interstate 
commerce,  is  a  usurpation  of  a  power  that  belongs 
solely  to  Congress."  The  several  states  of  this 
country  have,  heretofore,  been  so  indulgent  with 
corporations  created  by  other  governments,  that 
many  persons  have  taken  advantage  of  their  liberal- 
ity, by  procuring  charters  under  foreign  laws  and 
then  returning  to  their  domicile  and  doing  busi- 
ness as  foreign  corporations.  In  the  preceding 
chapter  we  have  already  referred  to  this  disposi- 
tion on  the  part  of  corporations  to  seek  protection 
of  foreign  laws,  and  shown,  by  an  analysis  of  the 
table  of  combinations  presented  in  the  Twelfth 
Census,  the  very  large  percentage  of  them  which 
derive  their  powers  from  a  single  state  the  laws  of 
w^hich  are  known  to  be  particularly  favorable  to 
corporation  interests,  and  if  any  other  general  list 
of  very  large  corporations  be  examined,  it  will  be 
found  that  a  great  majority  of  them  have  been  in- 
corporated under  the  laws  of  the  State  of  New 
Jersey,  no  matter  in  what  states  their  business  may 
be  actually  located. 

The  objects  which  lead  corporations  thus  to  pro- 
cure their  charters  from  foreign  states  are,  as  has 
already  been  explained,  to  escape  the  taxation  which 


336  Combinations, 

is  imposed  by  many  states  upon  the  capital  stock 
of  domestic  corporations,  and  to  secure  the  author- 
ity to  exercise  certain  powers  and  privileges  which 
are  not  granted  to  those  created  under  the  laws  of 
the  state  to  which  they  naturally  belong.  As  an- 
other instance  of  the  extent  to  which  promoters 
have  availed  themselves  of  this  leniency  of  the 
states  towards  foreign  corporations,  the  statement 
has  been  recently  made  that  ninety  per  cent,  of  the 
foreign  corporations  which  have  applied  for  per- 
mission to  do  business  in  the  State  of  Illinois,  are 
in  reality  Illinois  corporations  which  have  gone 
elsewhere  to  procure  their  charters  in  order  to  evade 
the  provisions  of  the  Illinois  laws. 

This  comity  between  states,  or  respect  for  each 
other's  acts,  has  been  carried  so  far  in  relation  to 
this  subject  as  to  amount  to  a  practical  discrimina- 
tion in  favor  of  foreign  corporations.  It  is  now 
time  for  them  to  throw  aside  this  conventional  rule 
of  propriety  by  which  they  have  been  bound,  which 
is  founded  upon  the  belief  that  the  general  legis- 
lative provisions  of  the  several  states  would  become 
substantially  uniform,  and  that  the  benefits  con- 
ferred upon  the  citizens  of  other  states  by  the  recog- 
nition of  their  laws,  would  in  a  large  measure  be 
returned  by  like  favors  shown  to  its  own  people 
abroad ;  but  which  has  resulted  in  a  practical  ces- 
sion of  the  power  to  create  corporations,  to  a  few 
states,  which  power  must  be  respected  by  all  the 
others  although  they  receive  nothing  in  return  for 
this  extraordinary  grant  of  extra  territorial  juris- 
diction. 

If  it  is  just  to  tax  domestic  corporations  upon 
the  full  amount  of  their  capital  stock,  notwith- 


Trusts  and  Monopolies.         337 

standing  the  fact  that  a  considerable  portion  of  its 
property  and  business  may  be  located  in  other 
states,  it  is  just  to  tax  foreign  corporations  upon 
the  full  amount  of  their  capital  stock,  although 
there  may  be  only  a  small  portion  of  their  property 
or  business  within  the  actual  jurisdiction  of  the 
state;  and  if  it  is  unjust  to  tax  foreign  corpora- 
tions upon  that  portion  of  their  stock  which  repre- 
sents the  property  which  is  not  within  the  state,  it 
is  a  much  greater  injustice  to  tax  that  portion  of 
the  stock  of  domestic  corporations  which  repre- 
sents a  legitimate  extension  of  their  business  into 
other  states.  Whatever  method  of  taxation  is 
adopted,  the  states  should  cease  to  wage  continual 
warfare  upon  their  own  corporations  while  allow- 
ing those  of  foreign  creation  to  go  practically  un- 
molested, and  whatever  the  provisions  of  their 
laws  may  be,  none  should  be  allowed  to  evade  them 
by  resorting  to  the  expedient  of  assuming  the  nom- 
inal protection  of  some  other  state  and  thus  becom- 
ing foreign  corporations. 

As  has  already  been  stated,  the  power  of  a  state 
to  deal  with  foreign  corporations  is  unquestioned, 
and  absolute.  They  should,  therefore,  in  the  sober 
and  judicious  exercise  of  their  powers,  enact  uni- 
form, just  and  consistent  laws  for  the  regulation 
of  both  foreign  and  domestic  corporations,  and 
cease  to  rely  upon  the  laws  of  other  states  to  regu- 
late a  considerable  portion  of  the  business  which  is 
carried  on  within  their  jurisdiction,  and  to  af- 
fect to  believe  that  other  states  will  do  that  which 
they  know  very  well  they  will  not  do.  They  owe 
it  to  their  own  corporations  which  are  trying  to  ob- 
serve their  laws  while  obliged  to  compete  with 


338  Combinations, 

those  created  in  other  states  which  are  not  subject 
to  them ;  they  owe  it  to  their  own  citizens  who  are 
doing  business  with  these  foreign  corporations  and 
who  are  liable  to  be  injured  by  unjust  methods  in 
business,  or  to  be  oppressed  by  high  and  unreason- 
able prices  or  charges,  and  they  owe  it  to  their  peo- 
ple whose  money  is  invested  in  these  stocks,  and 
who  are  now  obliged  to  depend  entirely  upon  other 
states,  and  foreign  laws  to  protect  them  from  fraud 
and  deception. 

Nearly  all  large  corporations,  and  especially 
those  which  have  resulted  from  the  consolidation 
of  smaller  concerns,  and  those  which  are  striving  to 
secure  a  monopoly  of  their  particular  line  of  trade, 
have  plants  or  branches  of  their  business  in  many 
of  the  states,  and  if  these  would  only,  seriously,  re- 
solve to  lay  a  firm  hand  upon  the  branches  which 
lie  within  their  jurisdiction,  they  could  readily 
compel  compliance  with  all  reasonable  regulations 
which  they  might  wish  to  impose  upon  these  cor- 
porations. If  a  number  of  the  larger  states  would 
adopt  a  uniform  and  adequate  system  of  laws  for 
the  regulation  of  foreign  corporations,  they  could 
readily  compel  them  to  abandon  many  of  the  prac- 
tices which  now  make  them  so  obnoxious  to  the 
people,  in  spite  of  the  efforts  of  a  few  states  to 
make  capital  out  of  the  sale  of  licenses  to  foreign 
corporations  for  the  undisguised  purpose  of  en- 
abling them  to  defy  the  laws  of  other  states. 

Having  once  seriously  resolved  to  adopt  practi- 
cal measures  for  the  regulation  of  foreign  corpora- 
tions, it  would  be  a  very  simple  matter  to  sub- 
ject them  to  state  supervision,  and  to  require  them 
to  submit  to  local  regulations  as  to  the  maximum 


Trusts  and  Monopolies.         339 

profits  to  be  earned  by  corporations;  just  as  for- 
eign capitalists,  who  desire  to  loan  out  money,  are 
now  required  to  submit  to  the  legal  rates  of  in- 
terest established  by  the  states  in  which  they  seek 
to  transact  business. 

We  have  spoken  in  another  chapter  of  the  direct 
relations  which  the  protective  tariff  bears  to  the 
industrial  trusts  and  combinations,  and  it  will  not 
be  necessary  to  discuss  the  subject  further  here; 
but  as  we  are  now  considering  remedies,  the  impor^ 
tance  of  the  subject  demands  that  we  briefly  state- 
[the  considerations  which  lead  us  to  class  tariff  re- 
vision as  among  the  most  important  remedies  that 
can  be  applied  to  the  trust  evil.  We  have  already- 
shown  that  the  purpose  of  the  protective  tariff  is. 
to  encourage  the  development  of  home  industries,, 
but  that  the  imposition  of  high  protective  duties, 
by  its  exclusion  of  foreign  competition,  facilitates 
the  formation  of  combinations  among  home  pro- 
ducers,  the  purpose  of  which  is  rather  to  secure 
control  of  the  industries  which  have  already  been, 
established  than  to  promote  or  extend  them;  that 
if  these  trusts  and  combinations  are  deriving  a 
benefit  from  the  protective  tariff,  they  are  wholly 
undeserving  of  it;  that  it  was  never  intended  for 
their  protection  and  should  be  withdrawn  from 
them ;  that  if  they  are  not  aided  by  this  protection,, 
'then  they  must  be  selling  as  cheaply  as  the  foreign 
producers  could  do  without  the  tariff;  that  the 
independent  producers  must  also  sell  at  the  same 
prices  if  they  sell  at  all,  and  that  the  duty  on 
these  articles  would  therefore  seem  to  be  of  no  use 
to  any  one  and  should  consequently  be  repealed. 
lAlso,  that  these  trusts  and  combinations  are  sell- 


340  Combinations, 

ing  large  quantities  of  their  products  in  competi- 
tion with  foreign  producers  in  foreign  markets, 
and  that  they  therefore  seem  to  require  no  pro- 
tection from  the  government  in  order  to  enable 
them  to  carry  on  their  business  with  profit;  that 
experience  affords  us  no  reason  to  believe  that  do- 
mestic combinations  will  deal  any  more  mercifully 
with  their  independent  rivals  than  foreign  competi- 
tors would,  and  since  there  is  no  mean?  of  affording 
the  benefits  of  protection  to  individuals  and  deny- 
ing them  to  the  trusts,  and  no  means  of  securing 
them  to  individuals  so  that  they  cannot  be  deprived 
of  them  by  the  trusts,  it  is  better  to  abandon  protec- 
tion entirely  in  these  cases.  We  therefore  suggest 
that  the  tariff  be  removed  from  all  articles  which 
are  produced  or  controlled  by  trusts  or  monopolies, 
and  that  the  people  be  given  the  benefit  of  foreign 
competition  in  those  lines  ofi  trade  in  which  com- 
binations have  practically  stifled  it  at  home. 

In  view  of  what  has  already  been  said  upon  the 
subject  of  national  legislation,  we  believe  that  this 
would  prove  to  be  the  most  practical  and  most  ef- 
fective remedy  that  can  be  adopted  by  the  Govern- 
ment of  the  United  States  for  the  prevention  of 
monopolies,  and  for  the  suppression  of  the  power 
and  arrogance  of  these  gigantic  combinations  of 
capital.  A  striking  confirmation  of  the  truth  of 
this  position  is  found  in  the  recent  almost  univer- 
sal demand  for  the  repeal  of  the  tariff  levied 
upon  the  importation  of  anthracite  coal, 
both  as  a  means  of  relieving  the  fuel  famine 
which  existed  in  consequence  of  the  recent 
strike  in  the  anthracite  coal  regions,  and  as  a  pre- 
cautionary measure  to  prevent  the  anthracite  coal 


Trusts  and  Monopolies.         341 

combination,  which  possesses  complete  control  of 
the  production  of  that  product  in  this  country, 
from  extorting  excessively  high  prices  from  the 
people  in  the  future. 

Many  other  remedies  directed  against  particular 
evils  resulting  from  the  operations  of  trusts  and 
monopolies,  have  been  proposed,  such  as,  to  pre- 
vent the  watering  of  stock,  discrimination  in  rates 
afforded  to  customers,  over-charging,  underselling 
of  competitors  in  particular  districts  for  the  pur- 
pose of  destroying  competition,  to  require  the  mak- 
ing of  reports,  the  keeping  of  certain  books,  etc., 
but  these  are  for  the  most  part  matters  of  detail 
which  should  naturally  grow  out  of  the  applica- 
tion of  some  well  considered  general  principles 
6uch  as  we  believe  we  have  here  indicated. 

Taxation  is  believed  by  many  to  be  the  proper 
means  of  curtailing  the  profits,  suppressing  the 
power,  and  discouraging  the  formation  of  trusts 
and  combinations;  but  taxes,  with  gne  exception, 
must  always,  in  the  last  analysis,  be  jpaid  by  the 
consumer,  and  the  collection  of  them  from  the 
manuTacturers  of  a  given  product  is  merely  a  con- 
venient way  of  collecting  revenue  from  a  slightly 
increased  price  of  that  product  which  the  consumer 
is  obliged  to  pay. 

Economists  are  pretty  well  agreed  that  there  is 
one  exception  to  this  general  rule,  though  some 
writers  contend  that  even  though  the  exception 
claimed  may  be  theoretically  correct,  the  value  of 
the  property  which  would  be  thus  excluded  would 
be  so  small  as  to  render  the  amount  of  taxes  which 
could  not  be  shifted  to  the  consumer,  comparatively 
imimportant.    The  exception  referred  to,  is  that  of 


342  Combinations, 

a  tax  upon  property  the  supply  of  which  is  fixed 
by  Nature  and  can  neither  be  increased  nor  dimin- 
ished by  human  agencies.  This  form  of  property 
may  be  included  in  the  general  term  land,  and  we 
are  told  that  the  burden  of  a  tax  levied  upon  land 
exclusive  of  the  value  given  to  it  by  labor  or  im- 
provements (sometimes  termed  Nature),  must  fall 
wholly  upon  the  landlord  and  cannot  be  cast  upon 
the  tenant.  The  theory  is,  that  the  value  of  the 
land  is  determined  by  supply  and  demand  as  af- 
fected by  its  fertility,  location^  density  of  popula- 
tion, etc.,  but  that  as  its  quantity  is  fixed,  the  im- 
position of  a  tax  can  neither  stimulate "  nor  dis- 
courage its  production,  nor  affect  the  price  by 
means  of  which  it  might  be  transferred  to  the 
tenant.  In  this  discussion,  however,  we  have 
merely  been  considering  the  products  of  human 
skill  to  all  of  which  the  general  laws  of  taxation 
pertain ;  and  as  a  tax  upon  land  has  not  been  pro- 
posed as  an  important  part  of  a  remedy  for  the 
trust  evils,  except  by  those  who  would  substitute 
a  land  tax  in  lieu  of  all  others  and  thus  revo- 
lutionize our  whole  system  of  taxation,  (not  deny- 
ing the  necessity  for  reform  in  our  revenue  system, 
or  questioning  the  good  results  which  might  fol- 
low from  the  collection  of  all  taxes  from  land 
values  if  such  a  system  could  be  brought  into  opera- 
tion within  a  reasonable  length  of  time),  it  is  not 
necessary  for  us  to  consider  the  economic  effects  of 
such  a  tax  at  this  time. 

If  no  trust  or  combination  has  been  formed  and 
the  taxes  levied  upon  corporations  are  high  in  one 
state  while  they  are  low  in  others,  the  only  effect 
of  the  tax  will  be  to  drive  them  from  the  state  to 


Trusts  and  Monopolies.         343 

do  business  elsewhere;  but  if  a  combination  has 
been  formed,  the  tax  will  simply  be  added  to  the 
cost  of  production  and  the  price  of  the  articles 
produced  will  be  raised  accordingly;  or  if  there 
is  no  combination,  and  the  taxes  levied  by  the  va- 
rious states  are  uniform,  they  will  be  added  to  the 
price  of  the  product,  just  as  though  an  actual 
combination  existed.  Thus  we  see  that  taxation 
would  not,  in  any  material  way,  interfere  with  the 
operation  of  combinations,  but  that  it  would  di- 
rectly tend  to  increase  the  burden  of  high  prices, 
which  is  one  of  the  very  things  that  the  people 
are  striving  to  avoid. 

It  is  true  that  by  the  levying  of  such  taxes  a 
large  amount  of  revenue  might  be  raised  for  the 
government;  but  if,  as  we  have  just  seen,  these 
taxes  must  eventually  be  paid  by  the  purchasing 
public,  and  that  they  would  amount  in  reality  to  a 
direct  tax  upon  the  consumers  for  the  collection  of 
which  the  combination  merely  acts  as  the  agent  of 
the  government,  it  would  be  far  better  to  abandon 
this  tax  altogether,  for  we  may  rest  assured  that 
these  combinations  will  always  be  careful  to  col- 
lect a  sufficiently  large  amount  from  the  public 
to  pay  them  handsomely  for  their  services  as  tax 
collectors.  Moreover,  even  if  these  taxes  were  to 
be  successful  in  appropriating  to  the  community 
a  considerable  portion  of"  the  profits  of  some  of 
these  combinations,  the  benefits  would  wholly  ac- 
crue to  the  state  or  municipality  in  which  the  com- 
bination happened  to  be  located,  and  would  be 
purely  local;  while  the  remainder  of  the  country 
would  still  be  obliged  to  pay  tribute  in  the  form 
of  high  prices. 

Some  would  have  us  rely  upon  education  as  a 


344  Combinations, 

cure  for  the  trust  evils,  and  this  is  perhaps  the  most 
general,  as  well  as  the  most  indefinite  remedy 
which  has  yet  been  suggested.  We  need  education 
it  is  true,  but  by  it  we  mean  the  serious  and  im- 
mediate consideration  of  the  conditions  which  con- 
front us,  with  a  view  to  the  practical  application 
of  the  remedy  to  the  affairs  of  to-day,  not  of  to- 
morrow, and  not  the  deliberate,  scholarly  investi- 
gation of  the  relation  of  the  trusts  to  the  people  as 
an  abstract  proposition,  with  a  view  to  a  thorough 
understanding  of  the  subject  by  the  next  genera- 
tion. The  action  of  the  statesman  is  what  the  oc- 
casion requires  rather  than  the  deliberation  of  the 
scholar. 

The  trusts  and  combinations  are  not  wasting  any 
time  considering  what  their  course  shall  be;  they 
have  plunged  boldly  into  the  field  of  action  where 
they  are  growing  more  and  more  powerful  ever}' 
da}',  and  the  evils  complained  of  are  becoming  cor- 
respondingly harder  to  remedy.  It  is  always  much 
more  difficult  to  redress  wrongs  which  have  be- 
come established  and  intrenched  behind  vested  in- 
terests than  it  is,  by  wise  and  judicious  legislation, 
to  prevent  their  growth  in  the  first  place.  Any  one 
can  readily  understand  how  much  more  arduous 
it  would  be  to  apply  the  remedies  herein  proposed 
to  the  giant  corporations  of  to-day  than  it  would 
have  been  to  have  imposed  them  upon  the  compara- 
tively small  ones  of  forty  or  fifty  years  ago;  and 
the  longer  we  delay,  the  more  perplexing  it  be« 
comes :  hence  the  necessity  for  prompt  and  decisive 
action. 

It  has  been  suggested  by  others  that  the  wealth 
accumulated  by  these  combinations  and  distributed 
among  their  stockholders  as  dividends,  will  in  time 


Trusts  and  Monopolies.         345 

be  reinvested  in  business  in  competition  with  the 
same  or  some  other  monopoly,  and  that  prices  will 
eventually  be  reduced  so  low  as  to  make  it  unprof- 
itable for  them  to  remain  in  the  business ;  but  this 
does  not  seem  to  be  entirely  logical.  If  these  com- 
binations have  built  up  their  power  by  underselling 
and  driving  independent  producers  out  of  the  busi- 
ness, it  does  not  seem  reasonable  to  expect  that 
new  competitors,  possessing  no  greater  advantages, 
will  be  any  better  able  to  successfully  compete  with 
them;  and,  if  the  mere  reduction  of  the  profits  is 
to  be  relied  upon  to  deter  them  from  business,  it 
would  seem  that  the  combination,  possessing  the 
greater  amount  of  capital,  could  much  better  afford 
to  continue  the  contest  than  its  independent  com- 
petitor. If,  however,  it  should  come  to  pass  that 
the  opposition  should  become  so  powerful  as  to 
possess  more  capital  than  the  combination,  the  re- 
sult would  in  all  probability,  be  merely  a  surrender 
of  the  one  to  the  other,  thus  forming  a  new  com- 
bination which  would  result  in  no  benefit  to  the 
people. 

In  connection  with  this  prospective  competition, 
much  is  made  of  the  advantages  which  small  pro- 
ducers are  said  to  possess  over  the  very  large  ones, 
such  as  closer  inspection,  catering  to  local  trade 
and  conditions,  etc.,  but  the  small  producers  have 
shown  by  their  act  of  combining  that  they  believe 
that  greater  advantages  are  to  be  secured  by  the 
use  of  greater  capital.  It  is  certainly  possible  to 
keep  as  close  and  accurate  an  inspection  over  the 
operations  and  affairs  of  a  great  combination  as  it 
was  over  those  of  the  concerns  which  have  entered 
into  it,  and  since  the  interests  involved  are  so 
much  more  imporant  in  the  case  of  the  combina- 


346  Combinations, 

tion,  we  would  seem  to  be  justified  in  presuming 
that  the  inspection  maintained  would  be  corre- 
spondingly greater.  Every  one  in  business  is  more 
or  less  familiar  with  the  care  which  is  taken  by 
large  corporations  in  the  employment  of  their  help, 
the  references  and  securities  required  of  them,  the 
secret  service  which  is  employed  to  shadow  those 
who  are  intrusted  ^vith  responsible  positions,  tho 
many  opportunities  afforded  in  large  concerns  for 
comparing  the  work  of  one  department  or  plant 
with  that  of  another,  and  with  all  these  facilities 
available  for  the  use  of  combinations,  we  are  forced 
to  believe  that  the  advantages  of  the  small  pro- 
ducers have  been  entirely  over-estimated,  and  that 
they  are  greatly  over-shadowed  by  the  numerous 
economies  which  may  be  secured  by  combination. 
In  summarizing  the  reports  made  by  twenty- 
eight  combinations  to  the  Bureau  of  Labor  in  reply 
to  questions  submitted  on  this  point,  Professor 
Jenks  says:  "Most  of  the  more  ardent  advocates 
of  the  competitive  system  are  of  the  opinion  thut 
the  pressure  from  competition  is  necessary  in  order 
to  secure  the  most  efficient  work  and  the  greatest 
care  in  saving  waste.  To  the  question  as  to  whether 
there  had  been  any  loss  of  efficiency  apparent  in 
\  the  combinations  through  carelessness  brought 
\  about  by  the  lack  of  competition  and  the  certainty 
\of  profits,  the  answers  were  quite  general.  Twenty- 
vone  made  the  statement  that  no  such  loss  of  effi- 
ciency appeared,  while  seven  others  went  so  far  as 
jto  assert  positively  that  there  had  been  a  distinct 
increase  in  efficiency.  The  reason  for  this  was 
stated  to  be  the  competitive  cost  system.  It  has 
been  explained  that  the  managers  of  the  different 
plants  working  under  the  combination  are  each 


Trusts  and  Monopolies.         347 

compelled  to  keep  careful  records  of  the  cost  of 
production  in  his  own  plant,  and  that  the  various 
plants  are  then  frequently  compared  one  with  the 
other  as  regards  their  efficiency  in  this  particular. 
In  this  way,  without  there  being  any  competition 
among  the  different  plants  so  far  as  the  marketing 
of  the  product  is  concerned,  there  is  brought  about 
a  most  vigorous  competition  among  them  in  manu- 
facturing, a  competition  more  searching  in  its 
nature  than  any  that  could  come  from  entirely 
independent  establishments,  owing  to  the  fact  that 
the  exact  cost  is  known  and  the  exact  degrees  of 
difference  in  efficiency  can  be  measured.  If  one 
may  judge  from  the  reports  furnished,  this  factor 
of  loss  of  efficiency  through  certainty  of  profits  has 
not  appeared  to  any  noteworthy  extent  in  any  of 
the  large  combinations  reporting.  The  central 
office  is  able  to  keep  accurate  note  of  the  efficiency 
of  the  different  plants  in  most  cases,  inasmuch  as 
frequent  reports  are  required  in  eighteen  cases 
daily,  in  other  cases  weekly  or  monthly ;  and  most 
of  the  combinations,  in  addition  to  these  regular 
reports  sent  in  from  the  different  establishmen1:s 
themselves,  are  also  in  the  habit  of  sending  special 
inspectors  to  examine  the  work  done  in  the  different 
plants,  and  to  make,  in  this  way,  personal  reports, 
as  well  as  personal  suggestions,  to  the  superintend- 
ents of  the  different  establishments. 

It  is  also  claimed  that  the  overgrowth  of  trusts 
and  combinations  will  eventually  lead  to  their  own 
disruption  and  dissolution,  but  we  find  nothing  in 
the  progress  of  the  movement  thus  far  to  support 
this  theory.  Thus,  the  Distilling  and  Cattle  Feed- 
ing Company  of  Illinois,  organized  in  1887,  was 


348  Combinations, 

le-organized  in  1895  as  the  still  more  powerful 
American  Spirits  Manufacturing  Company  which 
has  since,  in  1899,  become  amalgamated  with  the 
Distilling  Company  of  America,  forming  the  most 
complete  and  the  most  powerful  combination  of 
the  various  branches  of  that  line  of  trade  which  has 
yet  been  attempted.  Many  other  instances  of  simi- 
lar development  might  be  cited.  Of  the  one  hun- 
dred eighty-five  industrial  combinations  shown  by 
the  Twelfth  Census  as  doing  business  during  the 
year  1900,  only  six  are  reported  to  have  failed, 
■while  we  have  before  us  a  list  of  sixty-two  which 
have  been  since  organized  and  are  now  engaged  in 
business,  and  twenty  more  of  those  shown  in  the 
census  table  have  since  combined  with  others,  or 
have  been  absorbed  by  still  greater  combinations. 
Of  the  six  reported  to  have  suspended  one  had 
gone  into  the  hands  of  a  receiver  in  1899,  leaving 
only  five  failures  during  the  last  three  years,  or 
less  than  one  per  cent,  per  annum  which  is  not 
more  than  the  average  for  individuals  or  for  ordi- 
nary corporations. 

In  the  failures  which  have  already  occurred  we 
are  unable  to  detect  the  germs  of  any  disorder 
peculiar  to  combinations,  or  which  we  deem  likely 
to  develop  into  any  fruitful  cause  of  their  general 
dissolution;  and  in  view  of  the  further  fact  that 
ten  new  combinations  are  being  formed,  for  every 
one  that  has  failed,  we  do  not  believe  that  it  would 
be  the  part  of  wisdom  to  stand  calmly  by,  waiting 
for  their  automatic  dissolution  to  cure  the  ills  of 
which  the  people  complain. 

Competition  of  rival  concerns  has  frequently 
been  announced  as  the  hope  of  many  statesmen  and 


Trusts  and  Monopolies.         349^ 

writers  on  the  subject,  for  the  ultimate  regulatioa 
of  combinations  and  destruction  of  monopolies. 
And  this  is  the  remedy  which,  above  all  others, 
commends  itself  most  readily  for  adoption  by  those 
who  do  not  wish,  to  enter  seriously  into  the  discus- 
sion of  the  relations  which  combinations  bear  to 
the  people,  and  who  prefer  to  trust  to  the  future 
to  produce  remedies  sufficient  to  meet  all  evils  that 
may  arise.  Competition  is  the  governor  which  has 
always  been  relied  upon  in  the  past  to  regulate  the 
conditions  of  trade,  and  to  adjust  the  inequalities 
between  the  great  and  the  small,  but  it  has  been 
entirely  overriden  in  the  recent  rush  to  combina- 
tion, and  thrown  completely  out  of  gear. 

If  competition,  which  was  so  thoroughly  estab- 
lished and  maintained  for  so  many  years,  has  been 
so  completely  overborne  and  almost  entirely  swept 
away  by  the  gigantic  combinations  of  to-day,  it  is 
difficult  to  understand  how  new  competitors  who 
are  placed  at  so  much,  greater  disadvantage  can  be 
expected  to  be  more  successful  unless  some  sub- 
stantial assistance  be  afforded  them.  If  these 
trusts  and  combinations,  and  the  evils  which  have 
resulted  from  them,  have  grown  up  during  the  full 
strength  and  power  and  at  the  expense  of  the  com- 
petitive system  which  was  the  pride  of  our  age,, 
how  can  we  reasonably  expect  them  to  be  reformed i 
by  this  same  competition  which  has  been  so  badly]' 
crippled  and  undermined?  '^ 

In  view  of  the  enormous  rate  of  increase  m' 
combinations  to  which  we  have  before  referred,  it 
would  seem  that  all  substantial  competition  in 
many  lines  of  trade  must  soon  disappear  if  some- 
thing is  not  speedily  done  to  prevent  it.    Competi-, 


/ 


350  Combinations, 

lion  and  the  fear  of  it,  are  wnolesome  means  of 
regulating  trade,  but  it  seems  clear  that  if  we  are 
to  secure  their  services,  speedy  and  definite  means 
must  be  adopted  to  encourage  and  preserve  them. 

It  is  believed  that  the  insight  into  the  ways  and 
practices  of  these  combinations  which  would  be  af- 
forded by  state  supervision  of  the  affairs  of  cor- 
porations, together  with  the  consequent  preven- 
tion of  discriminating  rates  such  as  are  now  made 
by  them  in  order  to  destroy  competition  in  particu- 
lar localities,  and  which  are  received  by  them  from 
transportation  companies,  etc.,  would  do  more  to 
foster  competition  than  any  other  remedy  that  has 
yet  been  proposed. 

One  of  the  most  effective  means  yet  adopted  by 
trusts  and  combinations  for  the  suppression  of 
competition,  is  that  of  securing  a  monopoly  of  the 
sources  of  production  of  raw  material.  Without 
resorting  to  any  more  drastic  measures,  we  believe 
that  this  evil  can  be  remedied  by  a  proper  enforce- 
ment of  a  limitation  upon  the  profits  to  be  derived 
from  that  branch  of  their  business.  This  would 
in  the  first  place  tend  to  restrict  their  desire  to 
obtain  control  of  the  raw  material,  inasmuch  as 
it  could  no  longer  be  used  as  a  means  of  oppressing 
or  crippling  their  rivals,  and  in  the  next  place, 
even  though  they  have  secured  a  monopoly  of  it, 
they  may  be  compelled  to  supply  it  to  competing 
concerns  on  the  same  terms  at  which  it  is  fur- 
nished to  their  own  mills,  thus  preserving  the 
natural  supply  of  raw  material  substantially  ac- 
cessible to  all  and  removing  the  most  serious  im- 
pediment to  competition  in  the  production  of  fin- 
ished products. 


Trusts  and  Monopolies.         351 

The  power  of  the  government  to  protect  the 
people  against  injustice  and  oppression,  to  which 
we  referred  in  the  beginning  of  this  chapter,  in- 
cludes the  power  of  the  state  to  seize,  to  operate, 
and  to  control  coal  lands,  mineral  lands,  timber 
lands,  agricultural  lands,  railroads,  or  other  prop- 
erties which  may  be  necessary  to  supply  the  neces- 
sities of  the  public  wherever  and  whenever  the  wel- 
fare of  the  people  may  require  it.  Existing  laws 
may  require  that  the  people  shall  determine  upon 
a  price  which  they  shall  pay  to  the  owner  for  the 
use  of  his  property,  but  if  the  provisions  of  these 
laws  conflict  with  the  full  exercise  of  their  rights^ 
the  state  always  possesses  the  power  to  remove 
these  obstructions:  that  is,  no  group  of  men  shall 
be  permitted  to  say  we  control  the  coal  mines,  but 
Tve  refuse  to  mine  coal  even  though  the  people 
perish  for  want  of  fuel ;  or,  we  own  the  iron  mines 
but  will  not  operate  them,  though  manufacture 
may  be  obliged  to  cease  for  want  of  iron ;  or,  we 
command  the  copper  mines,  the  gold  mines,  the 
silver  mines,  etc.,  but  decline  to  work  them,  though 
trade  may  suffer  thereby;  we  possess  the  timber 
lands  but  refuse  to  produce  lumber,  though  the  peo- 
ple demand  it;  we  control  a  sufficient  amount  of 
the  agricultural  lands  to  make  provisions  scarce, 
but  refuse  to  cultivate  them  though  the  inhabitants 
may  starve  for  want  of  food ;  or,  we  rule  the  rail- 
ways, but  will  not  operate  them  though  the  com- 
merce of  the  nation  may  be  stopped  in  consequence 
thereof.  The  power  of  government  to  regulate  the 
public  highways  and  navigable  waters  is  univer- 
sally admitted,  and  this,  upon  the  ground  that  the 
preservation  of  the  rights  of  the  public  demands  it. 


352  Combinations, 

Why,  then,  should  not  the  same  reasons  lead  the 
government  to  assume  control  of  these  other  prop- 
erties whenever  an  occasion  may  require  it  to  do 
so?  The  right  to  command  these  natural  sources 
of  wealth  and  avenues  of  public  service  rests  in 
the  state  by  virtue  of  its  sovereign  power,  and  it 
may  and  must  exercise  it  whenever  it  becomes 
necessary  in  order  to  protect  the  rights  *and  well 
being  of  its  people. 

The  cry  of  paternalism  is  frequently  raised  fop 
the  purpose  of  frightening  off  any  serious  attempt 
at  state  regulation  of  the  affairs  of  corporations; 
but  every  act  of  government  partakes  more  or  less 
of  this  character,  since  it  is  intrusted  with  the  care 
and  protection  of  the  rights,  liberties,  property 
and  lives  of  its  people;  every  measure  adopted  for 
the  protection  or  encouragement  of  trade,  science, 
literature  or  art,  for  the  promotion  of  education, 
or  for  the  care  and  support  of  the  poor,  the  sick, 
and  the  afflicted,  is  met  by  this  cry  from  one  quar- 
ter or  another;  so  the  term  has  really  lost  all  its 
odious  significance  in  its  application  to  govern- 
mental functions,  and  now  merely  implies  that 
the  proposed  measure  goes  further  than  its  oppo- 
nents (owing  either  to  selfish  motives  or  perhaps 
to  real  fears  of  excessive  interference  with  private 
affairs)  desire  to  see  it  go.  It  is  merely  a  ques- 
tion of  degree,  not  of  kind.  We  should  not,  there- 
fore, be  deterred  by  the  charge  of  paternalism,  but 
examine  any  proposed  remedy  or  reform  solely 
upon  its  merits,  mindful  only  of  its  justice  and  the 
results  it  is  designed  to  secure,  remembering  that 
governments  are  formed  for  the  benefit  of  the 
whole  people,  and  that  whatever  seems  likely  to 


Trusts  and  Monopolies.         355 

contribute  to  the  general  welfare,  should  receive 
our  careful  consideration  and  support,  no  matter 
by  what  name  it  may  be  called  or  how  it  may  be 
characterized. 

The  very  act  of  creating  a  corporation  and 
granting  to  it  powers  and  privileges  which  are  not 
enjoyed  by  individuals,  is  in  a  sense  paternalism; 
yet  it  is  not  so  termed  by  corporation  promoters, 
and  if  it  is  not  offensive  paternalism  to  create  cor- 
porations, why  is  it  more  obnoxious  to  impose  such! 
regulations  as  are  necessary  to  require  them  to 
conduct  their  affairs  with  due  respect  and  regard 
for  the  rights  of  the  public  ? 

It  is  believed  that  after  reviewing  the  various 
measures  which  have  been  proposed  for  the  relief 
of  evils  growing  out  of  the  trust  problem,  a  num- 
ber of  which  we  have  herein  referred  to,  it  will  be 
found  that  most,  if  not  all,  of  the  evils  sought 
to  be  cured  by  them,  can  more  simply  and  effect- 
ively be  prevented  by  a  judicious  application  of  the 
following  three  principles  which  we  have  already 
explained  at  some  length :  first,  in  the  abolition  of 
all  special  protection,  favors  or  privileges  which' 
are  now  afforded  by  the  government  to  trusts 
or  combinations  or  to  the  industries  in  which  they 
may  be  engaged;  second,  state  supervision  and 
inspection  of  the  accounts  and  affairs  of  all  cor- 
porations; and  third,  the  establishment  by  law  of 
a  maximum  rate  of  profit  which  corporations  shall 
be  allowed  to  earn  in  business. 


THE  END. 


^//3 


r-'^ 


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